Minister of Finance: Indonesia’s Debt Is Getting Healthier

Finance Minister, Sri Mulyani

Minister of Finance of Indonesia, Sri Mulyani conveyed good news regarding national finance. She explained that Indonesia’s debt continues to shrink amid many countries experiencing bankruptcy.

Furthermore, government debt is also getting healthier due to a decrease in the ratio to gross domestic product.

This is a good achievement because in the future the risk of soaring debt will be very high. The current debt-to-GDP ratio is 39% with a nominal debt of IDR 7,040,32 trillion.

Minister of Finance Sri Mulyani Indrawati at the UI International Conference on G20, quoted Tuesday (21/6/2022), explained, “With the strong acceptance of the commodity boom, our debt-to-GDP ratio has actually fallen by 13%.”

The Covid-19 pandemic has entered its third year, but many countries are still experiencing very deep deficits. This condition leads to an increase in public debt for the country.

She added, “Some countries’ debt ratios are already above 60% and some are even 80% or even 100% of GDP. So they now have a more dramatic debt-to-GDP ratio, and for low-income and vulnerable countries the situation is unsustainable.”

Therefore, Indonesia in the G20 Presidency seeks to synchronize the policy framework and discussions with G20 countries to find solutions for low-income countries that are in debt.

“So many low-income countries are actually at dire risk or approaching a financial crisis. According to the IMF, more than 60 countries are in a very financially vulnerable condition and therefore the world needs to respond,” Sri Mulyani explained.

As previously reported, Bank Indonesia (BI) reported that its external debt was at US$ 409.5 billion in April 2022. Assuming US$ 1 is equivalent to Rp. 14,729, the external debt value is Rp. 6,031.52 trillion.

The debt in April decreased compared to March which was recorded at US$ 412.1 billion (Rp 6,069.82 trillion). On an annual basis, the position of external debt in April 2022 contracted 2.2% (YoY), deeper than the contraction in the previous month of 1% (YoY).

The decline in external debt occurred due to a decline in government debt, while private debt actually increased.

Bank Indonesia in its official release explained, “The position of the Government’s external debts in April 2022 was recorded at 190.5 billion US dollars, down from the position of external debt in the previous month of 196.2 billion US dollars. Annually, the growth of Government external debt contracted by 7.3% (YoY), deeper than the previous month’s contraction of 3.4% (YoY),”

The government’s repayment of debts worth US$ 1.9 billion was one of the reasons for the decline in external debt. Of the total payments, principal debt was recorded at US$ 1,576 billion and interest at US$ 374 million.