Government Debt Yields Higher Economic Impact Compared to G20 and ASEAN Countries

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Deputy Minister of Finance, Suahasil Nazara, has asserted that the government debt of Indonesia has a more significant impact on the economy compared to other countries in the G20 and ASEAN regions.

Suahasil highlights that Indonesia, along with Vietnam, stands out as nations that have managed their debt levels effectively, resulting in a more favorable impact on their respective economies.

According to data from the Ministry of Finance, each additional US$1 of debt in Indonesia generates an increase in GDP of more than US$1, specifically amounting to US$1.34.

Suahasil explains, “When we look at other countries, if their debt increases surpass the GDP growth rate, the figure is below 1.” This indicates that the impact of debt on the economy is less significant in those countries.

Comparatively, India’s debt has an impact of only US$0.73 per US$1 of debt, while Malaysia and China yield an impact of US$0.70 and the United States and the Philippines have an impact of US$0.55.

Yustinus Prastowo, Special Staff to the Minister of Finance, previously emphasized that the government has set a limit of 60% for the debt-to-GDP ratio. Yustinus further notes that the current debt ratio has decreased from approximately 40.7% to 39.17%.

“We need to be fair in acknowledging that we are within reasonable limits, including in terms of the budget deficit,” says Yustinus during the discussion on Your Money Your Vote.

He adds, “The government is not acting recklessly; instead, it aims for fiscal discipline. While we discuss the nominal value of the debt, it is essential not to overlook its utilization. We need to ask ourselves why we need to incur debt.”

These statements highlight the Indonesian government’s commitment to maintaining a sustainable level of debt of the country, ensuring that it contributes positively to the country’s economic growth and development.