Emerging from the Shadow of Debt

Each time the National Budget (APBN) comes under pressure, public debate typically revolves around three familiar options: increasing debt, cutting expenditure, or raising levies. All three are often treated as reasonable solutions.

Yet if this pattern continues to repeat, the nation merely moves from one fiscal patch to the next.

Indonesia requires a new perspective: taxation should no longer be viewed merely as a tool to fill the state’s coffers, but as a contract of trust between the state and its citizens.

Commodity prices shift easily, geopolitical conflicts disrupt supply chains, global interest rates are not always favourable, and the digital economy moves faster than regulatory capacity. In such circumstances, nations with weak revenue bases become more prone to seeking financing through debt.

Bank Indonesia recorded Indonesia’s foreign debt position (ULN) at $437.9 billion in February 2026, equivalent to Rp 7.507 trillion (using the exchange rate of approximately Rp 17,143 per dollar that Bank Indonesia reported at that time).

Debt is not inherently problematic. Within certain limits, debt can serve as an instrument for development.

However, when debt becomes a habit for closing revenue gaps, it transforms from a tool into a dependency.

Amid growing development needs, Indonesia’s tax ratio remains constrained at around 10 percent of GDP.

For 2026, the government targets a tax ratio in the range of 10.08–10.54 percent, whilst the Ministry of Finance’s projection places it at approximately 10.47 percent.

This figure does show improvement, but it remains insufficient to lift Indonesia out of the group of nations with relatively low revenue-raising capacity.

The problem is that a low tax ratio is not merely a matter of unmet targets or technical tax collection issues.

It reflects the state’s limited ability to mobilise resources to finance expanding public needs.

Higher-quality education, equitable healthcare services, reliable infrastructure, effective social protection, and the energy transition agenda all require strong fiscal support.

Without an adequate revenue base, the government’s room for manoeuvre to meet these demands will always be constrained.

Yet public expectations of the state continue to grow.

Citizens want better schools, more humane hospitals, improved public transport, controlled food prices, and well-targeted social assistance.

All of this requires strong and sustainable revenue.

However, strengthening state revenue must not be narrowly interpreted as simply raising tax rates.

The middle class faces pressure from education costs, healthcare expenses, instalments, and daily necessities.