Ministry of Finance of Republic of Indonesia : Indonesia’s Debt to GDP Ratio Below Neighbouring Countries

Jakarta, 13/01/2016 MoF - Government outstanding debt at the end of 2015 was IDR3,089 trillion or USD223.2 billion. Thus, the debt to Gross Domestic Product (GDP) ratio in 2015 was 27 percent, far below the maximum limit of 60 percent stipulated in Law No. 17 Year 2003 on State Finance.

'Seen from debt to GDP ratio in 2015, it was 27 percent,' said the Minister of Finance Bambang P.S. Brodjonegoro in a press conference on 2015 tax revenue at Head Office of Directorate General of Taxes, Jakarta on Monday (11/1).

The debt to GDP ratio, according to the Minister, is lower than the neighbouring countries', such as Philippine, and Australia of 36 percent, Malaysia by 56 percent, and Thailand by 44 percent. In fact, it is far below the United States and Japan of more than 100 percent.

However, he added, the number of debt to PDB ratio cannot indicate that a country is going to bankrupt. 'Japan's debt was two and a half times its GDP; 246 percent. Yet it is developed country and of course it will not bankrupt. In fact, it is the country with the third largest GDP in the world,' he said.

Furthermore, government debt is necessarily needed to promote and accelerate economic growth, since it will be used to finance government's productive expenditure; capital expenditures. The minister pointed out, the global uncertainty and the downward trend in commodity prices in 2015 lead to economic slowdown. Government expenditures is needed to boost the economic growth.

'The absence of commodity sector's contribution drives the government's intervention in terms of expenditures. The most important one is capital expenditure, instead of goods expenditures or solely salary expenditures,' he said.

Debt will bring positive impact, he continued, as long as it is used for productive expenditures; not only for economic growth, but also for people's welfare. 'Debt will bring positive impact as long as it is used for productive expenditures, because it will be used for our capital expenditure, well-targeted subsidy, so that the economic growth will be maintained and people's welfare will rise,' he said.(nv)