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Proposed 40% debt to GDP in 2025 could risk overall economy
The proposal stems from a document released by the National Development Planning Agency (Bappenas).
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Finance Minister Sri Mulyani Indrawati gets ready to brief the press on the state budget in her Jakarta office on Apr. 26, 2024. (JP/Deni Ghifari)
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government body responsible for the country’s development strategy has proposed to expand Indonesia’s outstanding debt to around 40 percent of gross domestic product (GDP) next year, which experts saw as a pragmatic move to accommodate new programs promised by the incoming administration.
It was stipulated in the 2025 government working plan (RKP) formulated by the National Development Planning Agency (Bappenas), which proposed lifting the debt-to-GDP ratio to between 39.77 and 40.14 percent.
The proposed ratio would mark another high after the country touched 40.74 percent of GDP at the height of the COVID-19 pandemic in 2021, which the Finance Ministry has strived to gradually reduce, getting it down to 38.59 percent of GDP last year.
“In terms of financing strategy, we will manage it prudently and carefully, and undertake our strategy pragmatically and opportunistically,” said Finance Minister Sri Mulyani Indrawati in a press briefing on Friday regarding the government’s debt strategy.
The Finance Ministry’s Budget Financing and Risk Management Director General Suminto Sastrosuwito told reporters on Thursday that the RKP was Bappenas’ domain, while his ministry was in charge of a different document, the draft macroeconomic projection and fiscal policy (KEM-PPKF), which has its own proposed figures on the same matter.
Both documents, however, would be used as references in drafting the state budget bill, which the government would present to the House of Representatives on Aug. 16.
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