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Govt debt issuance well below budget plan
Debt issuance in the first eight months of the year is down 20.5 percent from the same period in 2020 as the government seeks to mend the budget.
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Finance Minister Sri Mulyani Indrawati speaks on Sept. 13, 2021 during a hearing at the House of Representatives to discuss a bill on central-regional fiscal policy and another bill on general tax provisions. (Finance Ministry/Public relation team)
T
he Finance Ministry has said that government debt issuance declined 20.5 percent year-on-year (yoy) as of August, with the trend expected to continue until the year-end as the government strives to reduce the budget deficit.
Debt issue this year reached Rp 550.6 trillion (US$38.68 billion) through the end of August, down from Rp 692.3 trillion over the same period in 2020. This amounts to just 46.8 percent of the Rp 1.177 quadrillion debt issue planned for the full year.
“Even though it is already the eighth month of this year, debt issuance remains below 50 percent of the targeted amount. Why? This was due to an adjustment to the debt issuance target,” Finance Minister Sri Mulyani Indrawati told a virtual press conference on Thursday.
Sri Mulyani pointed to the government's decision to use the accumulated budget surplus from previous years as well as the burden-sharing scheme with Bank Indonesia as reasons for issuing less debt. In the burden-sharing scheme, the central bank purchases government bonds to push down the state’s borrowing costs.
After a massive spending hike to finance its pandemic handling and relief program, the government embarked on a path of fiscal consolidation to drive down the budget deficit from 6.09 percent of GDP last year to below the normal 3 percent cap by 2023, as mandated by Law No. 2/2020.
Key waypoints on the fiscal consolidation path are to reach a deficit of a maximum 5.7 percent in 2021 and 4.85 percent in 2022.
Global rating agencies warned that a prolonged wide deficit would increase the country’s financing risk, to then affect its sovereign credit rating.
