DIGIVESTASI - The next administration led by President-elect Prabowo Subianto will face the legacy of debt from President Joko Widodo's (Jokowi) government, which amounts to more than Rp8,000 trillion. Over two terms, the government under President Jokowi has recorded a significant increase in debt. According to the records of the Ministry of Finance (MoF), the government's debt position at the end of April 2024 reached Rp8,338.43 trillion, an increase of Rp3,547.85 trillion from the 2019 period.

This high level of debt is also compared to the initial position of Jokowi's first term. The government's debt position inherited by President Susilo Bambang Yudhoyono (SBY) at the end of 2014 for Jokowi was only Rp2,609 trillion.

Government Debt Warning Signs

Government debt as of the end of April 2024 is dominated by Government Securities (Surat Berharga Negara - SBN) amounting to Rp7,333.11 trillion, which contributes 87.9% of the total government debt. The rest is in the form of loans amounting to Rp1,005.32 trillion, or 12.1% of the total government debt. In terms of ratio, the government debt in April 2024 to gross domestic product (GDP) reached 38.64%, still below the safe limit of 60% of GDP according to Law No. 17/2003 concerning State Finance.

Finance Minister Sri Mulyani Indrawati said that the increase in the government's debt ratio is mainly due to increased borrowing for Covid-19 handling expenses, a phenomenon also seen in other countries.

Legacy of Maturing Debt Burden

In addition to the high amount of debt, the Prabowo administration will also face a buildup of maturing debt, especially in the period from 2025 to 2027. Government debt maturing in 2025 reached Rp800.33 trillion, almost twice the position of this year which amounted to Rp434.20 trillion. Sri Mulyani explained that the significant increase in maturing debt is also due to borrowing for Covid-19 pandemic handling needs.

Deputy Chairman of the DPR RI Commission XI, Dolfie OFP, emphasized the need to design a lower budget deficit target for 2025 so that the incoming government is not burdened with a large amount of debt. The government has designed a deficit target for the incoming government in 2025 at 2.45% to 2.82%, which is considered high by Dolfie OFP.

Options to Address Debt Burden

Chief Economist of Bank Permata, Josua Pardede, stated that the incoming government has two options to address the high debt burden, namely by conducting a debt switch or considering postponing the financing of government spending with low priority scales. This is expected to maintain fiscal deficit at a healthy level and reduce the government's cost of borrowing.

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