Indonesia’s President-elect, Prabowo Subianto, has recently faced backlash over reports suggesting he plans to increase the country’s public debt to 50% of GDP. However, a senior aide has clarified that there is no such plan in place. Thomas Djiwandono, who is responsible for fiscal discussions, stated that Prabowo has not set a target for debt levels and will adhere to legal limits on fiscal metrics. This clarification comes after the nation’s currency and bond markets were negatively impacted by the initial report.
Despite Prabowo’s statement about being more willing to take on debt to fund development programs and achieve economic growth targets, he has also emphasized the importance of fiscal prudence. The incoming president has reassured that he will stay within budget deficit limits and prioritize responsible financial management. This approach is crucial to maintaining Indonesia’s record of fiscal stability and credibility with investors.
In discussions with Finance Minister Sri Mulyani Indrawati, Prabowo’s team has been exploring ways to increase revenues, review spending, and create budget space for key programs without compromising fiscal integrity. It is essential to strike a balance between funding development initiatives and ensuring long-term economic sustainability. By keeping the deficit below 3% of GDP and working within legal limits, Indonesia can continue its tradition of prudent fiscal management.
Following the Asian financial crisis in the 1990s, Indonesia implemented key measures to prevent future economic instability. Mandating a limit on the annual budget deficit and capping debt at 60% of GDP has been instrumental in building a strong foundation for fiscal management. Despite facing challenges such as increased debt ratios during the COVID-19 pandemic, efforts have been made to reduce deficits and maintain investment-grade ratings from rating agencies.
While the road ahead may present economic uncertainties, Indonesia’s commitment to fiscal prudence under the leadership of Prabowo Subianto remains a top priority. By upholding responsible financial practices, the country can navigate challenges, foster sustainable growth, and uphold its reputation as a stable and reliable investment destination. It is imperative to continue prioritizing fiscal discipline to secure a prosperous future for Indonesia.
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