Jakarta, Indonesia Sentinel — The administration of Indonesia’s President-elect Prabowo Subianto plans to increase the national debt by Rp775.86 trillion ($48.8 billion) in its first year, according to the 2025 Draft State Budget (APBN) and accompanying Financial Note.
“Debt financing is projected at Rp775.86 trillion,” the document stated, cited on Tuesday, October 22, 2024.
The planned borrowing aims to cover a budget deficit of Rp616.2 trillion ($38.8 billion). With the remainder Rp154.5 trillion ($9.7 billion) allocated for investments in state-owned enterprises (BUMN) and special-purpose public service entities. And also Rp5.4 trillion ($340 million) will be directed toward regional government loans and regional state-owned enterprises (BUMD).
“The debt financing plan will primarily be in Indonesian rupiah, with fixed interest rates and medium-to-long-term maturities,” the document states.
The borrowing will be sourced through loans and the issuance of government bonds. The loan portion will come from both domestic and foreign lenders, while the bond issuance will be facilitated through two primary instruments: Government Bonds (SUN) and Sharia-compliant Sovereign Bonds (SBSN), also known as Sukuk.
These financing measures fall under the “below-the-line” section of the state budget structure. The 2025 Financial Note outlines a commitment to “prudent, innovative, and sustainable” budget financing.
National Debt Financing Rises Compared to Recent Years
The proposed debt financing for 2025 represents a significant increase compared to previous years. In 2022, the government borrowed Rp696 trillion ($43.9 billion), followed by Rp404 trillion ($25.5 billion) in 2023 and Rp553.1 trillion ($34.9 billion) in 2024. However, the planned borrowing for 2025 remains lower than the peak levels during the COVID-19 pandemic, when debt reached Rp1.229 trillion ($77.6 billion) in 2020 and Rp870.5 trillion ($55 billion) in 2021.
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For 2025, the majority of the borrowing—Rp642.6 trillion ($40.5 billion)—will come from government bond issuances, marking an increase from the 2024 projection of Rp451.9 trillion ($28.5 billion). The remaining debt will be sourced from loans, which are expected to rise sharply to Rp133 trillion ($8.4 billion) in 2025, compared to Rp81.2 trillion ($5.1 billion) in 2024.
Domestic loans are expected to decrease, with a projected Rp5.2 trillion ($327 million) in 2025, down from Rp20.1 trillion ($1.27 billion) in 2024. However, foreign loans are forecasted to rise significantly, reaching Rp128.1 trillion ($8.06 billion) in 2025.
Interest Payments
In addition to increased debt financing, the 2025 Financial Note outlines a strategy for managing interest payments. These payments are expected to rise to Rp552.85 trillion ($34.85 billion), the highest in five years. This is a significant increase from the Rp498.95 trillion ($31.46 billion) projected for 2024.
Interest payments in 2025 will consist of Rp497.62 trillion ($31.4 billion) for domestic debt and Rp55.23 trillion ($3.5 billion) for foreign debt.
The government’s debt interest obligations stem from three main factors: outstanding debt from previous years, new debt financing in 2024 and 2025, and planned debt portfolio management programs. Additionally, the cost of interest payments will depend on assumptions related to currency exchange rates, particularly the value of the Indonesian rupiah against major foreign currencies like the U.S. dollar, Japanese yen, and the euro.
With these measures in place, the Subianto administration faces the challenge of managing rising national debt levels while maintaining fiscal prudence and economic stability in the coming year.
(Raidi/Agung)
