Indonesia's Fiscal Yellow Light

Amid a global economic landscape still shrouded in uncertainty, the Indonesian government faces no small challenge in maintaining fiscal health. Fluctuations in commodity prices, geopolitical tensions, and tight global interest rate policies are external factors that cannot be fully controlled. In this context, the management of the State Revenue and Expenditure Budget (APBN) becomes a key instrument to ensure stability as well as the sustainability of development. Several fiscal indicators indeed show signs of pressure. However, rather than serving as a crisis alarm, this situation is more appropriately read as a “yellow light”. This is a warning signal that actually encourages the government to strengthen debt and fiscal management strategies in a more measured, cautious, and adaptive manner. In public discourse, debt is often perceived as a burden to be avoided. In nominal terms, the Indonesian government’s debt continues to rise. By the end of 2025, the total government debt has reached around Rp 9,600 trillion, equivalent to 40.46 percent of GDP. The majority of this debt, or about 87 percent, is in the form of Government Securities (SBN). This total debt is projected to breach Rp 10,000 trillion in 2026. However, the government often emphasises that the main indicator is not the nominal debt, but the debt-to-Gross Domestic Product (GDP) ratio. In this regard, Indonesia’s position remains relatively safe. The debt ratio is around 40 percent of GDP, far below the maximum limit of 60 percent set by law. Even projections show this ratio will be around 39–40 percent for the next few years. On paper, this appears reassuring. Indonesia still seems to have sufficient fiscal space to borrow. However, looking at the ratio alone without understanding the dynamics behind it can be misleading. Because fiscal health is not only determined by the size of the debt, but also by the ability to pay and the structure of its financing. One important indicator that is beginning to show pressure is the debt interest burden. The total government debt interest payments throughout 2025 reached Rp 520.7 trillion, an increase of 12.5 percent compared to the 2024 period. Most recently, debt interest payments in the first quarter of 2026 were recorded at Rp 144.3 trillion. This figure rose 26 percent compared to the same period last year. Debt interest payments have absorbed around 18.66 percent of state revenues. This figure far exceeds the safe limit often recommended by international institutions such as the IMF. This means that nearly one-fifth of state revenues are spent solely on paying interest and not on principal debt or development. Furthermore, Indonesia also faces what is known as the “debt wall” or peak debt maturity.