Towards The End Of 2024, Indonesia's Fiscal Problems And Debt Swelling Are In The Spotlight

Rupiah (Photo: Antara)

JAKARTA - Senior Economist of the Institute for Development of Economics and Finance (Indef) Didik J. Rachbini also highlighted fiscal problems that are increasingly burdening the Indonesian economy, especially related to the swelling of state debt.

According to Didik, Indonesia's debt continues to increase significantly from year to year, both in terms of percentage of Gross Domestic Product (GDP) and the nominal.

Didik said that from 2010 to 2024, Indonesia's debt to GDP ratio had increased from 26 percent to 38.55 percent. In September 2024, the total government debt was recorded at IDR 8,473.90 trillion.

"Outside of sectoral problems, there are fiscal problems that we face, namely debt from year to year continues to swell from percentage, let alone nominal. From 2010 to 2024 Indonesia's debt to GDP ratio continues to increase from 26 percent to 38.55 percent. The total government debt is IDR 8,473.90 trillion as of September 2024," he explained in his statement, Friday, December 27.

Didik said that this condition reflects the practice of policies and the political economy of unhealthy debt, where the government continues to maximize the budget without adequate control, thus increasing the burden of debt that continues to swell.

He has also criticized budget politics that reflects the weakness of democracy and weak political control over the past decade and has also highlighted the impact of this high debt on interest rate policy.

"Because all over the world already knows that leaders in Indonesia have a debt, so the interest rate is moved to increase makes no sense. This debt bond interest rate is the highest compared to ASEAN countries," he said.

Didik said that Indonesia's interest rate had to be increased to 7.2 percent, which was much higher than other ASEAN countries with consequences that had to be paid which drained people's taxes in large quantities.

According to Didik, Indonesia's interest rate is higher than Thailand (2.7 percent), Vietnam (2.8 percent), Singapore (3.2 percent), and Malaysia (3.9 percent) Indonesia's bond interest rate is relatively high. This happens because Indonesia continues to attract new debt every year, with the debt withdrawal value exceeding Rp1,000 trillion per year.

"As a result, the quality of spending has deteriorated. The portion of paying debt interest is the largest of all state ministry spending," he said.

Didik noted that the portion of the budget to pay interest on debt is getting bigger, so it eats away at state ministry spending. In 2014, the portion of debt interest payments was only around 11.09 percent of the total expenditure, but in 2024 it is estimated that it will increase to 20.10 percent.

"Continuously and will be affected by the Prabowo government," he said.

Didik said that non-productive spending also dominates the budget, while productive spending is shrinking. In 2014, the portion of personnel spending and goods spending is around 34 percent, and is expected to increase to 36 percent by 2024.

Didik also warned that every year, Indonesia must allocate around Rp. 441 trillion from people's taxes only to pay interest on debt, without taking into account the principal of the debt itself.