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Debt expected to rise until at least 2022
Indonesian government expects debt to keep rising until at least next year. Analysts say it may take longer to level off.
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The Finance Ministry building. (Courtesy of Finance Ministry/-)
T
he government expects public debt to keep rising for at least the next two years as the country tries to recover from the pandemic-induced economic slump, a Finance Ministry official has said.
Finance Ministry debt securities director Deni Ridwan said the increasing debt was necessary to finance the country’s billion-dollar health and economic recovery programs as state revenue lagged during the recession.
“One thing is certain, the projection for this year to the next suggests the debt burden will keep increasing in line with the amount of state spending needed for national economic recovery programs,” Deni said on July 1, as reported by Kontan.
The pandemic has forced the government to borrow more, causing the ratio of public debt to gross domestic product (GDP) to rise to 41.18 percent in April from around 30 percent before the pandemic. The World Bank has forecast that the ratio will rise to 43.5 percent by 2024.
The Supreme Audit Agency (BPK) has raised concerns about the government’s ability to service its debt. BPK chair Agung Firman Sampurna noted that interest payments on national debt relative to government revenue stood at 19.06 percent last year, much higher than the 7 to 10 percent recommended by the International Monetary Fund (IMF).
Read also: BPK raises concern about govt's ability to service debt
However, 86.74 percent of the debt is in the form of government bonds, the majority of which are held by domestic investors. As of June 30, foreign ownership of tradeable government bonds was only Rp 977.31 trillion ($US67.1 billion), around 22.82 percent of the total.
