Indonesia’s Prabowo to allow debt-to-GDP to reach 50%, FT reports By Reuters

JAKARTA (Reuters) – Indonesian President-elect Prabowo Subianto will allow the nation’s debt-to-GDP ratio to rise to 50% provided his administration can boost tax revenues, the Financial Times reported citing one of his closest advisers.

Prabowo’s brother and adviser Hashim Djojohadikusumo told the Financial Times in a London interview that Indonesia could still retain its investment-grade rating even if the debt-to-GDP ratio rises to 50%.

“The idea is to raise the revenue and raise the debt level,” Hashim said in the article.

“We don’t want to raise the debt level without raising revenue,” Hashim said, pointing to “taxes, excise taxes, royalties from mining and import duties”.

Prabowo’s economic team in Jakarta declined to comment on the interview when contacted by Reuters on Thursday.

His team had previously denied a media report that Prabowo planned to increase debt-to-GDP levels from under 40% to 50%. They said at the time the incoming president would continue to abide by existing fiscal rules.

Under those rules, the government’s budget deficit is capped at 3% of GDP and the debt-to-GDP ratio cannot exceed 60%.

Concerns about Prabowo’s borrowing plans weighed on bond prices and the rupiah last month, helping knock the currency to four-year lows against the dollar.

During campaigning, Prabowo had said he wanted to raise public debt levels, while also pledging to boost the tax-to-GDP ratio to 16% from around 10% now. He will take office in October.

Earlier this week Tempo magazine reported Prabowo had formed a team to explore ways to remove the fiscal deficit and debt-to-GDP ratio ceilings to fund his campaign pledges. His adviser for fiscal matters told Reuters he was not aware of any discussion to remove fiscal gap and debt ceilings.

($1 = 16,235 rupiah)