Wow! Indonesia Pays Interest On Debt 20 Percent Of Income, IMF Suggests Maximum 10 Percent

Illustration (Photo: Doc. Antara)

JAKARTA - The government is known to allocate a budget of Rp405.86 trillion this year to pay debt interest. Meanwhile, until the end of December 2021, Indonesia's debt was recorded at Rp. 6,908.87 trillion. The information emerged in the government's working meeting with the DPD RI today.

It is stated that the interest rate on the debt is around 20 percent of the 2021 state income, which is worth Rp. 2,03.1 trillion.

Responding to this, economic observer from the Center of Reform on Economics (CORE) Indonesia Yusuf Rendy Manilet said that this condition was in excess of the threshold recommended by the International Monetary Fund (IMF).

"For the terms of the debt-to-income ratio, the IMF recommends the ratio figure in the range of 7 to 10 percent," he said when contacted by VOI on Monday, January 24.

In Rendy's notes, before the pandemic occurred (2019), Indonesia's debt-to-income ratio was in the range of 14 percent.

"So, even before the pandemic, Indonesia's numbers were relatively high," he said.

Rendy added that the soaring debt-to-state income ratio was also influenced by the not-so-optimal revenue sector.

“Of course this is inseparable from the performance of state revenues, especially taxes, which have not been very encouraging in the last 10 years. Even when the first volume of the tax amnesty program was carried out, tax performance had not increased significantly," he explained.

As a comparison, he then shared some data that could be used as a reference for the state's financial condition.

"For comparison with other countries, the ratio of debt interest to Indonesia's state revenue is also relatively higher. In ASEAN, for example, Indonesia's ratio is relatively higher than Malaysia (12.5 percent), Thailand (5.2 percent), and the Philippines (11.5 percent)," he said.

For this reason, he hopes that the performance of the revenue sector, especially taxes, can continue to improve in line with the start of productive activities during the recovery period. Moreover, the government has rolled out the Voluntary Disclosure Program (PPS) which is touted as tax amnesty volume II.

"So of course this is the next homework, meaning that with a relatively high increase in debt interest, the continuation of tax reform is essential to pay attention to," he concluded.