AMRO Forecasts Indonesia's Debt Ratio Will Climb to 42% by 2029

TEMPO.CO, Jakarta - The international research institution ASEAN+3 Macroeconomic Research Office (AMRO) predicts that the Indonesian government's debt ratio will increase in the next three to five years. In the AMRO Annual Consultation Report: Indonesia-2025, the institution projects the debt ratio to reach 42 percent of Gross Domestic Product (GDP) in 2029.

The government targets to keep the debt ratio below 40 percent of GDP and reduce the fiscal deficit from 2.5 percent to 2.1-2.3 percent by 2029. "However, these medium-term fiscal targets have not yet incorporated initiatives introduced by the new Prabowo administration," AMRO wrote in the report cited on Wednesday, June 25, 2025.

AMRO mentions that the increase in debt occurs due to the primary balance deficit and higher borrowing costs. The institution anticipates that the new government programs launched in 2025 will increase state expenditure. " Meanwhile, medium-term revenue collection is projected to fall short of the government's target from the VAT rate hike in 2025, as the higher VAT rate only effectively applies to luxury goods and services," AMRO wrote.

The government's debt ratio in 2024 was recorded at 39.8 percent of GDP. AMRO projects a gradual increase of the ratio, namely 40.7 percent in 2025, 41.1 percent in 2026, 41.7 percent in 2028, and 42 percent in 2029. The ratio is still below the maximum limit of 60 percent of GDP as stipulated in Law Number 17 of 2003.

Meanwhile, Bank Indonesia noted that the government's foreign debt position in April 2025 grew by 10.4 percent annually to US$208.8 billion. Compared to March 2025, this amount increased by 7.6 percent.

Executive Director of the Communication Department of Bank Indonesia, Ramdan Denny Prakoso, stated that most of Indonesia's foreign debt is long-term. "Indonesia's foreign debt structure remains healthy, supported by the prudent principles of its management," Denny said in an official statement on Monday, June 16, 2025.

Bank Indonesia noted that the sectors benefiting from foreign debt include Health and Social Activities at 22.3 percent, Government Administration, Defense, and Mandatory Social Security at 18.7 percent, Education Services at 16.4 percent, Construction at 12 percent, and Transportation and Warehousing at 8.7 percent.

Denny mentioned that the foreign debt ratio to GDP decreased to 30.3 percent in April 2025 from 30.6 percent in March 2025.

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