Indonesia’s public debt continued to increase significantly, both on a monthly and annual basis, mainly due to the issuance of government securities (SBNs), especially domestic SBNs.
The Ministry of Finance said that by May 2024, the public debt has reached 8,353,020 trillion rupees (about 511 billion US dollars). This figure is up 565 trillion rupees from May 2023 and 14,590 trillion rupees from April 2024.
Finance Minister Sri Mulyani Indrawati said in the monthly report of the Ministry of Finance, APBN Kita, quoted on Thursday, July 4, 2024, that the debt ratio stands at 38.71 percent of gross domestic product (GDP), which is still below the safety limit of 60 percent of GDP as stipulated in Law No. 17/2023 on State Finance.
The government’s debt to the SBN stands at Rp7,347.50 trillion, consisting of domestic SBNs at Rp5,904.64 trillion and foreign SBNs at Rp1,442.85 trillion.
In addition, the government’s debt from loans stood at Rs 1,005.52 trillion, consisting of domestic loans of Rs 36.42 trillion and foreign loans of Rs 969.10 trillion.
Sri Mulyani pointed out that the majority of the public debt comes from the country, with a proportion of 71.12 percent. The composition of the public debt mainly comes from the SBN, accounting for 87.96 percent.
She stressed that an efficient SBN market can strengthen the resilience of Indonesia’s financial system to economic and financial shocks.
“With the debt financing activities through the issuance of SBN, the government also supports the development and deepening of the domestic financial market,” Sri Mulyani said.
To ensure effective long-term debt management, the government aims to create a deep, active and liquid domestic SBN market. This involves the development of various SBN instruments, including thematic SBNs such as Green Sukuk and SDG Bonds (SDG Bonds and Blue Bonds).
In addition, the government is encouraging digital transformation in the issuance and sale of SBNs, supported by online systems. This approach enhances the effectiveness, efficiency and credibility of debt sourcing through SBNs.
Effective debt portfolio management is essential to maintain overall fiscal sustainability. The government is committed to prudent and measurable debt management, focusing on interest rate, currency, liquidity and maturity risks.
The debt ratio remains well controlled at 38.71% of GDP in May 2024, consistently below the safety limit of 60% of GDP in accordance with Law No. 17/2003 on State Finances. This ratio shows a downward trend, from 40.74% in 2021, to 39.70% in 2022 and 39.21% in 2023.
Debt Management Strategy
The government’s medium-term debt management strategy for 2024-2027 aims to maintain the debt ratio around 40%, prioritize medium- and long-term debt supply, and actively manage the debt portfolio.
At the end of May 2024, the maturity profile of public debt is considered safe with an average maturity of 8 years. This disciplined debt management supports the positive assessments of the rating agencies (S&P, Fitch, Moody’s, R&I and JCR).
“To date, Indonesia continues to maintain its investment grade sovereign rating amid global economic dynamics and financial market volatility,” Sri Mulyani concluded.
