Over the past several years, governments worldwide have seen their national debt levels surge as they rolled out stimulus packages and policy measures to prop up their economies. This trend has been apparent across the spectrum: from established powerhouses like the United States and major European nations to emerging and developing economies in Southeast Asia and Africa. Yet, amidst this global rise in indebtedness, a few countries have managed to keep their debt relatively low. One standout in this regard is Indonesia.
Indonesia’s Debt-to-GDP in Perspective
To understand why Indonesia’s debt situation is noteworthy, it’s useful to look at the ratio of its gross debt to Gross Domestic Product (GDP). According to data from the International Monetary Fund (IMF), Indonesia’s gross government debt stands at about 40.51% of its GDP as of 2024. Essentially, the country’s total debt amounts to approximately 40.51% of its annual economic output.
Is 40.51% low? To put this figure into context, comparing Indonesia’s debt-to-GDP ratio with its regional neighbors helps. In Southeast Asia, the Philippines has a debt-to-GDP ratio of around 57.6%, Thailand’s is about 65%, and Malaysia’s is near 68%. Among the region’s major economies, only Vietnam posts a lower ratio than Indonesia. On a broader scale, when placed alongside global giants like India, China, and the United States—all of which have higher debt-to-GDP ratios—Indonesia’s relatively modest figure stands out even further.
Why Is Indonesia’s Debt So Low?
A key factor lies in how Indonesia manages its government spending. National debt is essentially the result of government borrowings needed to cover budget deficits—when government expenditures outpace revenues. In Indonesia, the administration under President Joko Widodo (Jokowi) has maintained a fiscal stance that keeps borrowing relatively contained.
In 2023, Indonesia’s total government revenues stood at about 2,774 trillion rupiah (approximately US$180 billion). These revenues are primarily derived from taxes—such as corporate income tax, personal income tax, and value-added tax—and customs and excise duties. Additionally, Indonesia benefits from non-tax revenues, which come from state-owned enterprises (SOEs), natural resource extraction (oil, gas, minerals), and other government assets.
On the expenditure side, the government spent around 3,121 trillion rupiah (about US$202 billion) in 2023. This spending covered numerous initiatives, including funding for line ministries, non-line ministries, and transfers to regional governments. The difference between spending (US$202 billion) and revenue (US$180 billion) is roughly US$22 billion—a deficit of about 1.65% of Indonesia’s GDP.
Comparing Indonesia’s Fiscal Management Internationally
A deficit of 1.65% of GDP might still raise questions: why is Indonesia’s debt not climbing as rapidly as others, given it too runs a deficit? The answer lies in relative measures. When we compare Indonesia’s deficit ratio to other countries, it fares quite well. Many emerging and developed economies run significantly larger deficits. For example, India’s deficit can exceed 8.8% of its GDP in certain years, while Thailand’s deficit is closer to 2.6%. In other words, Indonesia consistently shows more prudent deficit spending habits, which helps keep its overall debt burden contained.
Moreover, Indonesia’s GDP has been growing at a steady rate. Strong economic growth means the denominator of the debt-to-GDP ratio—GDP—is expanding, often at a pace that keeps the ratio stable or even reduces it over time. Even during the global economic downturn in 2020, Indonesia’s economy contracted by only 2.1%, a relatively mild setback compared to some of its neighbors, which experienced sharper declines. As growth resumed, GDP expanded, aiding in stabilizing or lowering the debt-to-GDP ratio.
The Role of State-Owned Enterprises
While government fiscal prudence and stable GDP growth are large pieces of the puzzle, there’s another significant factor to consider: Indonesia’s vast network of state-owned enterprises (SOEs). These government-linked companies generate revenues that bolster the national budget and undertake large infrastructure projects—efforts that might otherwise fall squarely on the government’s balance sheet.
In 2021 and 2022, Indonesian SOEs recorded notable net profits, with 2022 profits exceeding 170 trillion rupiah (around US$11 billion). This profit pool partly finds its way into government coffers, reducing the need for public borrowing. Additionally, when major infrastructure projects are financed through SOEs—such as the Jakarta-Bandung High-Speed Rail—these enterprises might take on debt themselves, rather than the government doing so directly. For instance, Indonesia’s state-owned railway company, PT Kereta Api Indonesia, reportedly secured loans from Chinese state-owned banks to fund this project. This means the government’s official debt figures remain lower, while some liabilities are essentially “off-loaded” onto the books of its SOEs.
Pros and Cons of Indonesia’s Approach
Indonesia’s approach, which leverages SOEs and maintains relatively tight fiscal controls, has clear advantages. It allows for a more modest official debt level, reassuring investors and rating agencies that the government’s finances are stable. However, the approach is not without risks. If SOEs accumulate substantial debt and encounter financial trouble, the government could be compelled to step in. During the COVID-19 pandemic, for example, the Indonesian government provided various forms of bailouts and support to struggling SOEs. Thus, while the government’s debt appears low, the broader public sector as a whole might still be exposed to considerable liabilities.
Conclusion
Indonesia’s relatively low debt-to-GDP ratio is a product of measured fiscal policy, steady economic growth, and the strategic use of its state-owned enterprises to handle projects and generate revenue. Compared to many other economies, Indonesia’s government has shown restraint in deficit spending, which helps keep official debt figures manageable.
Yet, this picture is nuanced. The reliance on SOEs to shoulder major expenditures shifts some financial risk away from the central government’s ledger. While it keeps public debt figures low, it also creates a set of contingent liabilities that could surface if those enterprises run into trouble.
In the end, whether Indonesia’s approach is “good” or simply different is a matter of perspective. What’s clear is that Indonesia’s combination of prudent fiscal management, strong growth, and strategic use of SOEs has allowed it to stand out on the global stage for its comparatively low official national debt.