Last Year, Jokowi Targets Debt Ratio To Drop In The 2024 State Budget

President Joko Widodo (left) with Minister of Finance Sri Mulyani (Photo: Doc. Ministry of Finance)

President Joko Widodo (Jokowi) through the Minister of Finance (Menkeu) Sri Mulyani has officially conveyed the Macroeconomic Framework and Fiscal Policy Principles (KEM PPKF) in the 2024 State Budget Draft to the DPR.

It was stated that the government proposed a debt ratio of 38.07 percent to 38.97 percent of next year's gross domestic product (GDP).

"To encourage prudent, creative, innovative, and sustainable financing, among others, by controlling the debt ratio in the management limit in the range of 38.07 percent to 38.97 percent of GDP," said the Minister of Finance at the DPR Plenary Meeting today, Friday, May 19.

For information, this debt ratio tends to be more gentle than the 2023 realization. Citing information reported by the Ministry of Finance, the debt-to-GDP ratio in January was 38.56 percent, valued at IDR 7,754.9 trillion.

Then, in February the debt ratio was at the level of 39.09 percent equivalent to Rp7,861.6 trillion and the last one in March was 39.17 percent of GDP worth Rp7,879 trillion.

Just so you know, the government's debt had penetrated the ratio of 41.35 percent of GDP equivalent to Rp6,554.5 trillion in May 2021. This jump was caused by budget needs in handling the delta variant of COVID-19, which at that time was reaching the peak of spread.

The question is why the debt ratio two years ago increased even though it was nominally lower than this year? The answer is Indonesia's ability to produce gross domestic products.

At that time, Indonesia's GDP plummeted due to strict social restrictions that left the economic sector paralyzed and experienced a decline in production. As a result, the value of the GDP comparison decreased and caused the debt ratio to soar.

Likewise, the 2024 debt scenario if you use the inverse analogy. The debt ratio could fall even though it has increased nominally because Indonesia's GDP has jumped dramatically by the economy which is recovering.

To note, in the State Finance Law Number 17 of 2003 and the State Budget Law, it is stated that the debt ratio is still safe if it is below 60 percent of GDP.