2022 State Budget realisation: Limited movement of debt ratio
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Realisasi APBN 2022: Gerak terbatas rasio utang
16 January 2023
By: Tegar Arief
Jakarta – Amid skyrocketing state revenue performance last year, debt to gross domestic product ratio realisation was quite high even though it decreased compared to the previous year.
Based on Bisnis’ calculation, debt ratio last year reached 39.5% of the gross domestic product (GDP).
That number is acquired by dividing the total debt of the government that reaches Rp7,706.38 trillion and the GDP assumption by referring to the deficit realisation of the 2022 state budget (APBN) that reaches Rp19,508.40 trillion.
The debt total consists of outstanding government securities (SBN) that, as of the end of last year, has reached Rp6,858.12 trillion and a total loan of Rp848.26 trillion.
Compared to the realisation in 2021 that reached 41% of the GDP, debt ratio throughout 2022 was successfully reduced by the government.
However, debt ratio last year was still higher compared to the realisation in 2020, which is the first year of the Covid-19 pandemic, that reached 39.35% of the GDP.
Regarding this matter, economists see that debt ratio persisted due to the Covid-19 pandemic that had increased state expenditure in the last 3 years.
This condition is worsened by the Russia-Ukraine war that caused a crisis in the energy sector, so fiscal authorities increased subsidy allocation and energy compensation significantly.
Then, the crisis caused an inflation, so central banks in all countries aggressively drove the benchmark interest rate throughout last year.
Centre of Reform on Economics (Core) Indonesia Economist Yusuf Rendy Manilet said that the limited decrease in debt ratio amid the high state revenue was caused by the strengthening of the US dollar exchange rate.
According to him, that condition is also supported by the change in the benchmark interest rate in the last months of last year that drove the returns of the SBN issued by the government.
“This is because foreign debt value is affected by the rupiah weakening, so the amount increases. Returns also increased due to the change in the benchmark interest rate,” he said to Bisnis on Sunday (15/1).
Yusuf added that synergy among fiscal and monetary authorities must be continued to control debt rate. In the fiscal side, revenue must be boosted along with rupiah intervention by the monetary authority.
“BI can still carry out a market intervention to stabilise rupiah’s exchange rate,” he said.
Meanwhile, the government affirmed that the debt ratio was still within the safety limit as it is still under 60%, which is the highest ceiling according to Law No. 17/2003 on State Finance.
However, according to Institute of Development on Economics and Finance (Indef) Economist Esther Sri Astuti, the government can carry out various breakthroughs to suppress liabilities.
The breakthroughs include maximising state revenue and negotiating for debt repayment delay or relief.
“There are many conditions to achieve debt [repayment] delay or relief. However, Indonesia must try the opportunity,” he said.
Esther added that the government must also focus on issuing domestic debt securities. According to her, this strategy must be applied to anticipate an increase in the debt interest ratio. “Because domestic debt has more affordable interest,” she said.
High risk
On the other hand, the government realises that the high debt risk this year coincides with the inflation pressure and the economic recession risk.
Finance Minister Sri Mulyani Indrawati said that the world was still facing a high inflation rate due to the global food and energy crisis.
This triggers the tightening of monetary policies through aggressive interest rate increase. Hence, costs to recover the economy increase, which will affect economic activities.
“Countries with high debt might experience debt crisis,” the Finance Minister said last week.
For example, she mentioned countries in South Asia, such as Bangladesh and Pakistan, have been included in the patient list of the International Monetary Fund (IMF).
Countries in the Middle East that import fuel are also facing a difficult situation. According to her, this must be focused on because 2023 is predicted to be a difficult year by global institutions.
“Not only inflation, but recession might also occur. There might be debt sustainability issues in various countries,” she said.
