As of March 2023, the Indonesian government debt had reached IDR 7,879.07 trillion (US$ 475,640.2 million). Compared to February 2023, the number increased by IDR 17.38 trillion from the previous IDR 7,861.69 trillion. However, it is still considered safe compared to other countries’ debt.
Indonesia’s debt is currently within safe limits with a ratio of debt to Gross Domestic Product (GDP) of 39.17%. The safe ratio is based on the debt limit that has been stipulated through Law No. 17 of 2003 concerning State Finance, which states that the maximum ratio of safe debt to GDP is 60%. Consequently, the current government debt is still within safe limits, and under control.
“The government always manages debt carefully with controlled risks through an optimal composition, both in terms of currency, interest rates, and maturity,” said the Ministry of Finance of the Republic of Indonesia on April 26, 2023.
Currently, according to data as of March 31, 2023, the composition of government debt consists of Government Securities (SBN) of 89.02% or IDR 7,013.58 trillion, and 10.98% consisting of foreign loans of IDR 865.48 trillion. However, in terms of the composition of government debt, domestic debt was dominated by 72.09%.
Finance Minister Sri Mulyani Indrawati had just announced a debt issuance of IDR 224.8 trillion as of March 2023, or the equivalent of 32.3% of the 2023 State Budget (APBN) target of IDR 696.3 trillion.
“Debt financing through government securities and loans is in accordance with the 2023 financing strategy,” said Indrawati on April 17, 2023.
Indrawati explained that this budget financing prioritized prudent, flexible, and accountable principles to finance the State Budget as part of the state strategy to maintain a buffer for the government.
“We are doing this front-loading step because we anticipate a higher interest rate hike for longer, so we take a position before the interest rate hike occurs,” said Indrawati.
Comparison with other countries
The debt ratios of various countries members of the G20 or ASEAN are in a fairly high position due to the Covid-19 Pandemic and global risks. Despite being in a high position, Indrawati stated that Indonesia’s debt ratio recorded back in 2022 is still relatively lower compared to other countries, even among ASEAN countries.
As of 2022, Indonesia’s government debt ratio is currently in third position with 39.6% of the GDP, lower than South Korea in fourth position, which reaches 54.1% compared to the country’s GDP. However, Indonesia’s figure is higher than Saudi Arabia and Russia with respective percentages reaching 24.8% and 16.2% which occupy the position of the smallest debt among the G20 countries and ASEAN. Meanwhile, the highest ratio was occupied by Japan with 263.9%.
Indrawati explained that the position of government debt in December 2022 had reached IDR 7,733.99 trillion or 39.8% of GDP. The number is better compared to December 2021, when the debt ratio reached 40.74%.
Fluctuations in debt ratio are caused by the influence of financing transactions in the form of issuance and repayment of Government Securities, and repayment of loans, as well as changes in the exchange rate of the rupiah against the US Dollar.
“Nevertheless, this increase is still within safe, reasonable, and controllable limits accompanied by optimal portfolio diversification,” based on a report from the State Revenue and Expenditure Budget.
