The government expects the debt ratio to increase from 39.81 percent of GDP in 2024 to 40.54 percent in 2025. Finance Minister Purbaya Yudhi Sadewa stated gradual fiscal consolidation, stronger revenues, better-targeted spending, and active portfolio management would keep borrowing in check. The IMF cautioned that interest costs and contingent liabilities need continued vigilance.

JAKARTA, Thekabarnews.com—The Indonesian government has identified four fiscal strategies to cut the country’s rising debt ratio. These will be used while still funding the country’s development programs.

Indonesia’s government debt rose to 40.54 percent of gross domestic product in 2025 from 39.81 percent in 2024. Finance Minister Purbaya Yudhi Sadewa addressed the House of Representatives on Tuesday, July 14.

“The ratio was still below Indonesia’s statutory limit of 60 percent of GDP,” Purbaya said.

Law No. 17/2003 on State Finance sets that ceiling, not Law No. 17/2023, as some reports have stated. The law also generally limits the annual budget deficit to 3 percent of gross domestic product.

The government’s first strategy is gradual fiscal consolidation to reach a positive primary balance. A primary surplus is when the government collects more money than it spends, excluding interest payments. This means it has less need to borrow more money to pay for what it already owes.

The second approach emphasizes the expansion of sources of state revenues, not only at increasing tax rates. In addition, the authorities intend to use data and technology to expand the tax base to cover the digital economy, informal businesses, and previously unrecorded economic activity.

Customs and excise authorities will also step up digital services, audits, and enforcement against illegal imports and illicit excisable products.

Purbaya stated that the implementation of these measures would safeguard investment, exports, and legitimate business activity.

The third pillar is to make spending more effective. The government will direct spending to higher priority and more productive programs. It will also improve the accuracy of subsidies and social assistance through the use of Indonesia’s integrated socio-economic database.

The fourth strategy is active management of the debt portfolio, with debt switches, buybacks of bonds, and loan conversions. Such instruments can extend maturities, reduce the pressure to refinance and limit exposure to foreign exchange movements.

In 2025, the Finance Ministry converted 21 Asian Development Bank loans totaling US$1.9 billion from US dollars and Japanese yen to rupiah. This transaction lowered currency risk and yielded a net interest rate of zero percent, the ministry said in its 2025 APBN KiTa report.

Indonesia ended 2025 with a budget deficit amounting to Rp670.34 trillion, equivalent to 2.81 percent of GDP. Data from the Directorate General of Financing and Risk Management quoted by ANTARA shows that government debt had reached Rp9,920.42 trillion, or 40.75 percent of GDP as of March 31, 2026.

But staying under the legal ceiling does not automatically eliminate fiscal risks. Indonesia’s domestic borrowing costs are relatively high, at an effective rate of about 7.5 percent in 2024, the International Monetary Fund (IMF) said.

It also cautioned that fiscal policy space could be constrained if economic or financial conditions worsen. Contingent liabilities and higher interest expenses could also limit that space.

So the government’s capacity to keep debt stable will hinge on steady revenue growth. It will also depend on the generation of concrete economic benefits from spending. Successful containment of interest and refinancing costs through active debt management will be necessary.