Indonesia’s Government Debt Continues to Increase: A Look at the Numbers and Management Strategy
Indonesia’s Government Debt Continues to Rise, Reaching Rp8,353.02 Trillion in May 2024
Indonesia’s government debt has been steadily increasing, reaching Rp8,353.02 trillion in May 2024. This significant rise is primarily driven by the issuance of government securities (SBN), especially domestic SBN.
According to the Ministry of Finance, the government debt position has increased by Rp565 trillion from May 2023 and by Rp14.59 trillion from April 2024. Minister of Finance Sri Mulyani Indrawati stated that the debt ratio currently stands at 38.71 percent of the Gross Domestic Product (GDP), which is below the safe limit of 60 percent of GDP as stipulated by law.
The majority of the government’s debt comes from SBN, totaling Rp7,347.50 trillion, with domestic SBN accounting for Rp5,904.64 trillion and foreign SBN at Rp1,442.85 trillion. Additionally, loans make up Rp1,005.52 trillion of the government’s debt, with domestic loans at Rp36.42 trillion and foreign loans at Rp969.10 trillion.
Sri Mulyani emphasized the importance of an efficient SBN market in enhancing Indonesia’s financial system resilience against economic and financial market shocks. The government aims to create a deep, active, and liquid domestic SBN market by developing various SBN instruments, including Green Sukuk and SDGs Bonds.
Furthermore, the government is promoting digital transformation in the issuance and sale of SBN to enhance effectiveness, efficiency, and credibility in debt procurement. Effective debt portfolio management is crucial for maintaining overall fiscal sustainability, with the government focusing on managing interest rate, currency, liquidity, and maturity risks.
The government’s Medium-Term Debt Management Strategy for 2024-2027 aims to maintain the debt ratio around 40 percent, prioritize medium to long-term debt procurement, and actively manage the debt portfolio. With an average time to maturity of 8 years, Indonesia’s debt maturity profile is considered safe, supporting positive assessments from credit rating agencies.
Despite global economic dynamics and financial market volatility, Indonesia continues to maintain its sovereign rating at investment grade. Sri Mulyani concluded that the government remains committed to prudent and measurable debt management to ensure fiscal sustainability in the long run.