Indonesia's Debt Ratio Rises Towards The End Of Jokowi's Government, Economist: Causes Unstability

Rupiah (Photo: Antara)

The Ministry of Finance (Kemenkeu) noted that the ratio of government debt as of the end of May 2024 reached IDR 8,353.02 trillion, an increase to the level of 38.71 percent of gross domestic product (GDP) ahead of the end of President Joko Widodo (Jokowi) administration.

Meanwhile, the current position of government debt has increased when compared to the position in the previous month or month to month (mtm) which amounted to Rp8,338.43 trillion or with a ratio of 38.64 percent to GDP.

Bank Mandiri economist Reny Eka Putri said that significant government debt growth could be a burden for the State Revenue and Expenditure Budget (APBN). Too large a debt can cause high interest payments, reducing space for fund allocation in important sectors such as infrastructure, education, and health.

"In addition, large debt also poses a risk of increasing the country's economic and financial instability, especially if the government faces difficulties in paying the debt," he explained to VOI, Tuesday, July 2.

However, Reny reminded the importance that government debt can also have a positive impact if managed properly. The debt can be used to fund urgent development projects, which are expected to make a positive contribution to economic growth.

In addition, Reny said that there are several factors that need to be considered to evaluate the extent to which government debt will burden the state budget.

"We are quite optimistic that the Government has the ability to manage debt and ensure effective and efficient use of debt funds," he said.

Reny explained that the use of funds for profitable development and investment projects can help reduce debt burdens, while increasing the potential for state revenue.

In addition, the government also needs to implement a sustainable fiscal policy, by controlling state spending and increasing revenues, including through tax reforms.

Reny conveyed that through a disciplined fiscal policy, the government can help manage debt better and maintain the stability of the state budget.

Thus, Reny explained that although the condition of high government debt can be a burden for the state budget, with good management and strong economic growth, the negative impact of the debt can be minimized.

"In this context, the government needs to take appropriate action to manage debt wisely and maintain the country's fiscal stability," he added.

This year, Reny said that the APBN deficit would still be maintained below 3 percent of GDP if state revenues and expenses were realized according to the APBN.