Anastasya Lavenia Yudi, Jakarta – Indonesian government plans to raise new debt of Rp781.9 trillion in 2026, with the debt-to-Gross Domestic Product (GDP) ratio projected at 39.96 percent next year.

According to Book II of the 2026 Financial Note, the debt comprises State Securities (SBN) issuance worth Rp749.2 trillion and loans totaling Rp32.7 trillion.

The document states, "The government ensures that debt management is conducted prudently, accountably, and controlled, in order to maintain fiscal sustainability," as quoted on Tuesday, August 19, 2025. The debt-to-GDP ratio has been fluctuating in recent years.

During the Covid-19 pandemic in 2021, the debt ratio was 40.7 percent. It declined to 39.7 percent in 2022 and 39.2 percent in 2023 but rose again to 39.8 percent in 2024. The actual ratio until June 2025 reached 39.9 percent.

Interest payments on debts in the 2026 State Budget Draft are set at Rp599.4 trillion, an 8.6 percent increase from the 2025 outlook of Rp552.1 trillion. This includes Rp538.7 trillion for domestic debt and Rp60.7 trillion for foreign debt.

Deni Friawan, a researcher at the Centre for Strategic and International Studies, noted that the large portion of interest payments suggests the government is "robbing Peter to pay Paul," relying on new loans to cover existing debts.

He also highlighted the growing total debt and rising debt ratio over the past few years.

"Although the portion of interest payments has slightly decreased, its share in national expenditure remains very significant, around 19 percent," Deni said during a media briefing at the CSIS office in Central Jakarta on Monday, August 18, 2025.

He added that the gap between issued debt and interest payments is narrowing, which could push the debt-to-GDP ratio higher and further limit fiscal space.

Deni also criticized the government's spending priorities for President Prabowo's programs while maintaining the State Budget deficit below three percent.

"There must be trade-offs, and sacrifices have to be made. In this case, the trade-off is that fiscal allocation to the regions becomes lower," he explained.

For reference, the government has set the Regional Transfer Budget (TKD) for 2026 at Rp 650 trillion, down from this year's allocation of Rp919 trillion.

Source: https://en.tempo.co/read/2040961/indonesias-rp781-trillion-debt-plan-sparks-criticis