Indonesia’s Debt Execution Hits 78% of 2025 Target
The Indonesian government has successfully secured 570.1 trillion Rupiah in debt financing as of October 31. This achievement represents 77.94 percent of the total 731.5 trillion Rupiah debt target set in the 2025 state budget outlook.
This strong realization rate highlights the government’s commitment to a disciplined financial strategy. It ensures that financial obligations are met promptly while maintaining the country’s overall fiscal stability.
Deputy Finance Minister Suahasil Nazara confirmed that financing activities remain on track. The government is utilizing strong cash buffers, prefunding potential, and active debt management to anticipate future needs.
The total budget financing, which includes both debt and non-debt sources, reached 532.9 trillion Rupiah by the end of October. This figure constitutes 80.5 percent of the full year’s outlook of 662 trillion Rupiah.
This total comprises the 570.1 trillion Rupiah in debt financing and a negative 37.2 trillion Rupiah from non-debt sources. The negative non-debt figure is primarily due to the strategic use of the government’s existing cash reserves.
A critical step in this successful execution was the approval from the House of Representatives. This allowed the government to use 85.6 trillion Rupiah from its existing excess budget balance (SiLPA).
This strategic use of reserves proactively reduced the need to issue additional sovereign bonds (SBN) on the public market. It demonstrates prudent fiscal management aimed at lowering future debt servicing costs.
The substantial and early fulfillment of the debt plan creates a solid financial cushion. It enhances the government’s flexibility for the remainder of the fiscal year, allowing for stable operations.
Favorable Market Conditions Support Financing Strategy
The decision to limit new sovereign bond issuance was timely, capitalizing on improving sentiment. This positive shift in both domestic and international market conditions greatly supported the government’s financing strategy.
Deputy Minister Suahasil Nazara observed that the favorable market environment is conducive to the debt plan’s smooth execution. Despite global volatility from macroeconomic uncertainties, Indonesia’s bond market has shown remarkable resilience.
This market strength is visible in the general decline in sovereign bond yields. This indicator signifies lower borrowing costs for the government amid strong onshore financial markets and high liquidity.
Furthermore, the perception of Indonesia’s country risk among global investors has improved significantly. This aligns with the nation’s stable economic performance throughout the reporting period.
This rising confidence is specifically reflected in the shrinking spread between Indonesia’s 10-year US dollar-denominated bonds and the US 10-year Treasury bond. The spread narrowed substantially to 57 basis points in November, down from 84 basis points at the start of the year.
As Suahasil explained, this narrowing spread clearly indicates a reduction in country risk. It is an especially strong signal because it compares two similarly denominated assets, fundamentally isolating the comparison between Indonesia and the United States.
Minimizing this risk spread remains a core objective of the government’s long-term finance strategy. The market’s positive response validates the current approach to debt management.
Prudent Management and Local Market Impact
The government’s proactive debt and cash management showcases its fiscal prudence. This approach goes beyond simply hitting the annual budget target.
By realizing nearly 78 percent of its debt plan early, the government has built substantial cash reserves. These buffers provide crucial flexibility to manage unforeseen expenses or market shocks without resorting to expensive new borrowing.
The anticipatory approach, using prefunding and the strategic use of the excess budget balance (SiLPA), bolsters the government’s capacity. It ensures smooth funding for priority investment sectors within the national economy.
The choice to reduce sovereign bond issuance by using the excess budget balance is a conservative yet highly effective measure. It serves to optimize the national debt profile.
Curbing the volume of new SBN issues immediately cuts the current year’s interest expense burden. Crucially, it projects a strong image of fiscal strength and resource availability to both domestic and international investors.
The sustained strengthening of the local bond market, indicated by lower yields and strong business confidence, affirms the effectiveness of policy coordination. This success is a result of tight collaboration between Bank Indonesia’s monetary policy and the government’s fiscal strategy.
The shrinking sovereign spread is concrete proof that Indonesia is perceived as a lower-risk destination for global finance flows. This strengthens the country’s credit profile and is expected to further reduce future borrowing costs across the entire economy, facilitating more efficient long-term debt plan implementation.
Local Market Impact: Crowding-In Effect and Capital Cost Reduction
The reduction in the planned issuance of Sovereign Bonds (SBN) by 85.6 trillion Rupiah, achieved through the strategic use of the excess budget balance, has a direct and profound impact on domestic financial markets that goes beyond simple debt accounting.
This decreased supply of government paper creates a tangible “crowding-in” effect, a key mechanism in local finance.
By limiting the volume of available risk-free assets, local commercial banks and institutional investors, which are mandated to hold a certain level of government securities, are compelled to direct their excess liquidity toward higher-yielding assets.
This drives increased demand for corporate bonds, commercial paper, and equities listed on the Jakarta Composite Index (JCI), thereby effectively lowering the cost of capital for the private sector and supporting corporate investment and business expansion across the economy.
Furthermore, the reported narrowing of the USD sovereign bond spread to 57 basis points is a powerful de-risking signal that establishes a lower sovereign risk floor.
Since this dollar-denominated spread serves as the benchmark for all Indonesian entities seeking external funding—from state-owned enterprises issuing global bonds to large private companies refinancing foreign debt—its contraction immediately translates into cheaper borrowing costs for the entire Indonesian economy in international capital markets, enhancing Indonesia’s competitiveness for regional foreign direct investment (FDI) inflows compared to regional peers.
