JAKARTA - The government's policy of setting a limit on the maximum debt ratio of 60 percent to Gross Domestic Product (GDP) is considered by the Indonesian Center of Reform on Economics (CORE) economic observer Yusuf Rendy Manilet to be inaccurate. The reason, he considered the percentage is too high for Indonesia.
“This debt ratio is a figure adopted from the Maastricht Treaty. The 60 percent figure comes from the middle value of the government debt ratios of European countries at that time," he told VOI on Monday, January 24.
According to Rendy, the characteristics of a large number of countries in the blue continent are quite different from the condition of Indonesia.
"From here, the point of criticism can be conveyed, because of course the fiscal conditions between European countries and developing countries (which later adopted this figure) are different," he said.
Rendy explained, in a report entitled Forward-looking Macroeconomic Policies–Re-examining Inflation and Debt Limits published by UNESCAP, it was revealed that the fundamental points were the difference.
"It is stated that the 60% percent figure is more suitable for countries that are categorized as developed countries. Meanwhile, the debt-to-developing country ratio is suggested to be in the range of 40 percent and not to last for a fairly long term," he said.
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Just so you know, in the January 2022 edition of our APBN report, it is known that the government debt until the end of December 2021 was recorded at IDR 6,908.87 trillion or 41 percent of GDP. Meanwhile, the debt ratio of 60 percent refers to the Law on State Finance Number 17 of 2003 and the Law on the State Budget.
"Of course, Indonesia's debt-to-GDP ratio, which is currently around 40 percent, needs to be a concern, especially for fiscal sustainability in the medium to long term," concluded Rendy.
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