30-8-2024 (JAKARTA) In a recent address to the Indonesian House of Representatives, Finance Minister Sri Mulyani Indrawati has called for a more nuanced understanding of the nation’s debt situation, urging citizens to look beyond mere nominal figures and political rhetoric.
Speaking at a working meeting with Commission XI on Wednesday, Indrawati expressed frustration with what she perceives as a habit among Indonesians to fixate on the raw numbers of government debt. As of July 2024, the total government debt stands at IDR 8,502.69 trillion, equivalent to 38.68% of the country’s Gross Domestic Product (GDP). This figure encompasses both Government Securities (SBN) and loans.
The Finance Minister argued that public perception of government debt is often coloured by political narratives rather than economic realities. “Indonesian society is accustomed to continuously seeing debt more in terms of its nominal value,” Indrawati noted. “There is indeed a distortion from the political perspective versus the technocratic side of Indonesia’s debt management.”
Indrawati sought to reassure the public, emphasising that the government is managing the debt with utmost care and precision. She elucidated that a significant portion of the debt, namely the SBN, serves as both an investment vehicle and a monetary instrument for Bank Indonesia (BI) to maintain financial liquidity.
“In a country where the bond market is already quite deep and liquid, we issue quite a lot of SBN as a monetary instrument,” the Minister explained. She cautioned against conflating short-term financial instruments with long-term debt, noting that the inclusion of one-year revolving SBNs in debt figures can lead to misunderstandings and unwarranted public alarm.
Indrawati stressed the importance of context when evaluating Indonesia’s debt situation. Comparing Indonesia’s debt-to-GDP ratio with those of other nations, she pointed out that at 38-39%, Indonesia’s position is relatively favourable. Many developed economies, she noted, grapple with ratios exceeding 60% or even 100% of GDP.
The Finance Minister’s remarks highlight a shift in focus for the Indonesian government. Rather than dwelling on the absolute size of the debt, Indrawati emphasised the importance of developing a deeper, more liquid bond market. This approach, she argues, will help reduce issuance costs and overall debt burdens in the long term.
“We are actually more focused on making our bond market deeper and more liquid so that issuance costs and debt burdens can be reduced, not on the issue of large numbers,” Indrawati stated.
In an effort to promote transparency and allay public concerns, the Finance Ministry has committed to ongoing education about the nature and management of government debt. This initiative aims to provide citizens with a more comprehensive understanding of national financial strategies and to contextualise Indonesia’s debt within the broader economic landscape.
