S&P Warns Indonesia on Debt Interest Payments; Has the Country Entered the Danger Zone?

Jakarta – Global ratings agency S&P Global Ratings has renewed its scrutiny of Indonesia’s rising fiscal pressures. The warning came during S&P Global Ratings’ Asia-Pacific region webinar on Thursday, 26 February 2026.

During the event, S&P Global Ratings’ sovereign analyst Rain Yin stated that Indonesia’s debt interest payments could potentially breach a key threshold of 15% of government revenue. Yin added that should this ratio remain above 15% for a sustained period, S&P could view Indonesia’s rating prospects more negatively.

Monitoring by CNBC Indonesia reveals that the ratio of government debt interest payments to national revenue has already exceeded 15%. In 2024, this ratio reached approximately 17%. The figure refers to the Government’s Central Financial Report (LKPP) 2024, with total debt interest payments reaching Rp488.4 trillion, whilst national revenue was recorded at Rp2.850.61 trillion.

Nevertheless, S&P Global has not yet changed Indonesia’s outlook from Stable, and Indonesia’s credit rating remains at the BBB level.

However, the statement reveals widening concerns about Indonesia’s fiscal space. S&P also noted the previous year’s deficit realisation of 2.9% of Gross Domestic Product (GDP), which exceeded estimates, particularly due to weaker revenue. Indonesia has a fiscal rule that caps the maximum deficit at 3% of GDP.

The development of the deficit approaching this limit is considered to have raised the risk of downward pressure on Indonesia’s fiscal trajectory. S&P stated it will continue to monitor two key factors. First, whether the medium-term fiscal framework remains anchored to established fiscal rules. Second, the direction of government revenue in the coming period.

“Two developments we are monitoring very carefully are the medium-term fiscal framework and revenue performance,” said Yin.

Earlier in February, Moody’s changed Indonesia’s outlook to negative from stable, citing weakening governance and rising fiscal risks under President Prabowo Subianto’s administration. Nevertheless, Moody’s maintained Indonesia’s rating at Baa2.

Alongside S&P and Moody’s, Fitch Ratings is also a primary reference for global investors in assessing a country’s risk in meeting its debt obligations. For Indonesia, Fitch last issued its assessment on 11 March 2025 with a BBB rating and stable outlook, meaning Indonesia remains in the investment grade category according to Fitch, whilst the stable outlook indicates that the factors supporting the rating are considered adequately protected.

The Importance of Rating Agencies for Indonesia

Debt ratings are an important reference for global investors. Many institutional investors, such as pension fund managers, insurance companies, and bond mutual funds, have internal regulations that restrict them to purchasing assets with specific ratings. Therefore, a country’s rating determines how broadly the investor base can enter its bond market.

When Indonesia’s rating is strong and in the investment grade category, the investor space is typically broader and financing costs tend to be cheaper.

Conversely, below investment grade lies the speculative grade category, often called non-investment grade or junk, because its risks are considered higher. If a country is at this level, investors generally demand greater compensation through higher yields, thus raising financing costs.

Rating agencies do not merely assign numbers. They assess the economic foundation of a country from various angles. Starting with the strength of the economic engine – how solid growth is and how resilient the economy is to global shocks. Then fiscal health, reflected in the government’s ability to withstand pressure from expenditure, deficits, and rising debt costs.

They also examine the debt-to-GDP ratio to determine how heavy the debt burden is relative to the size of the economy, as well as political stability and policy to assess the consistency of the government’s direction and its credibility in the market’s eyes. Finally, future growth prospects are also a consideration, including whether the economy still has the space and “fuel” to continue progressing in the coming years.

To more easily understand Indonesia’s rating position among global standards, it should be understood that each rating agency has different scales and naming conventions, although their meanings are relatively aligned. Therefore, the following are the rating scales of S&P Global Ratings, Moody’s Ratings, and Fitch Ratings from the highest to the lowest level as a reference.