Heru Andriyanto, Ria Fortuna Wijaya, Jakarta – Indonesia is set to shoulder its largest debt interest bill on record in 2027, with payments projected to consume about 19% of state revenue and exceed spending on social protection or the entire government payroll.
The government has budgeted Rp 650.3 trillion ($36.39 billion) for interest payments in 2027, up 11.7% from the Rp 582.2 trillion projected in the 2026 outlook. That amounts to roughly Rp 1.78 trillion a day spent solely on servicing interest throughout 2027.
The mounting burden has drawn criticism from politicians from the Indonesian Democratic Party of Struggle (PDI-P), the only major party outside the broadly pro-government coalition in the House of Representatives.
House Speaker Puan Maharani, a senior PDI-P politician, urged the government to exercise greater prudence in taking on new debt and warned that borrowing "must not leave an unfair burden for future generations."
Under the proposed 2027 state budget, the government plans Rp 876.3 trillion in net debt financing, slightly above the Rp 868.1 trillion projected for 2026. Net government securities issuance will account for Rp 779.9 trillion, while loans will provide Rp 96.3 trillion.
The Center of Reform on Economics (CORE Indonesia) said the growing cost of servicing past debt was limiting the government's ability to use fiscal policy to stimulate businesses and the real economy, despite President Prabowo Subianto's characterization of the budget as expansionary.
"The expansionary label and the numbers don't necessarily point in the same direction, as state spending grows by only 3.9%," CORE said in a report.
Excluding interest payments, real government spending will grow by just 2.6% in 2027, according to CORE, sharply below the 15% growth projected in the 2026 outlook and the government's 8.6% nominal GDP growth assumption for 2027.
"The role of government spending as an engine of economic growth is actually diminishing," the think tank said.
Total government spending is projected to increase by Rp 154.8 trillion next year, but the hike in interest payments alone accounts for 44% of that increase.
"In other words, almost half of the additional spending creates no new economic activity and merely pays interest on existing debt," CORE said.
Debt servicing vs other priorities
The scale of the burden becomes more apparent when compared with other government priorities. The Rp 650.3 trillion interest bill exceeds the Rp 549.9 trillion allocated for social protection and the Rp 625.24 trillion earmarked for government personnel.
It is also more than three times the Rp 195.3 trillion food security budget and larger than the allocation for any individual ministry or agency, including the National Nutrition Agency and the Defense Ministry. Among major spending categories, only the Rp 820.9 trillion education budget is larger.
Finance Minister Purbaya Yudhi Sadewa has repeatedly maintained that Indonesia's debt remains at a safe level, noting that it is well below the statutory ceiling of 60% of GDP.
Central government debt stood at Rp 10,293.69 trillion as of June 30, equivalent to 41.26% of GDP, according to Gadjah Mada University economist Wisnu Nugroho.
Wisnu argued that the debt-to-GDP ratio alone does not fully reflect Indonesia's debt burden, pointing instead to the share of government revenue absorbed by interest payments.
He estimated that interest payments would absorb around 19% of state revenue and 25.4% of tax revenue in 2026, meaning fiscal pressure could intensify long before debt approaches the statutory ceiling.
Wisnu said another critical question was whether borrowed funds were being directed toward productive investments that expand economic capacity and generate future government revenue.
Fellow Gadjah Mada University economist Evi Afifah cautioned that the rising burden did not necessarily mean Indonesia's borrowing had become unsustainable.
"Debt itself is not necessarily a problem. What matters is whether the benefits generated by borrowing outweigh the costs," she said.
Borrowing for infrastructure, education and health can strengthen economic capacity and generate future returns, Evi said. But rising interest costs inevitably reduce the government's room to fund competing priorities.
"Every rupiah used to pay interest is a rupiah that cannot be used for other priorities," she said, unless the government raises additional revenue or borrows more.
Source: https://jakartaglobe.id/business/record-debt-interest-bill-to-consume-19-of-state-revenu