Debt-to-GDP Ratio Indonesia Safe, Debt-to-Revenue Ratio a Concern
Reza Akbar, economist at the Institute for Development of Economics and Finance (Indef), is concerned about rising public foreign debt. Although the government and various analysts repeatedly state that Indonesia's (public) debt-to-GDP ratio is safe at a level below 30 percent, Akbar says debt should be seen in relation to government revenue.
Based on data from Indonesia Finance Ministry, Indonesia's debt-to-GDP ratio was 27.02 percent of GDP at the end of June 2017, a level that is envied by most developed nations including the United States and Japan. However, Akbar says the picture becomes less rosy if one takes into account government revenue.
The problem is that Indonesia's tax revenue is not in line with expectations and therefore the government needs to make new debt (selling bonds) to settle old debt. This jeopardizes fiscal stability and limits room for much-needed government spending. Akbar added that debt creation is only a positive matter if it is used for productive matters such as infrastructure development, poverty eradication, food security, and job creation.
Mukhamad Misbakhum, member of Commission XI within the House of Representatives (DPR), says the Indonesian government uses public debt for productive matters, particularly infrastructure development including the construction of new harbors, roads and irrigation.
Based on the latest data from Indonesia's central bank (Bank Indonesia) Indonesia's total external debt (public + private sector foreign debt) at the end of June 2017 amounted to USD $335.3 billion, up 2.9 percent year-on-year (y/y), a much lower growth rate compared to Q1-2017 and Q2-2016. External debt growth was influenced by slower public sector external debt growth and ongoing contraction in private sector external debt. At the end of Q2-2017, public sector external debt amounted to USD $170.3 billion.
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