Indonesia’s President-elect Prabowo Subianto will increase the country’s debt-to-GDP ratio level gradually, alongside efforts to boost tax revenues, his top adviser and brother Hashim Djojohadikusumo told a seminar on Monday.
The increase may be within a range of 1 to 2 percentage points per year, he said, describing Indonesia’s current debt-to-GDP level of under 40% as “underleveraged.”
Investors and rating agencies are closely monitoring Prabowo’s fiscal plans after his earlier comments suggesting an appetite for higher debt levels to fund his costly campaign promises triggered concern about potential fiscal slippage.
In June, capital outflows hit the rupiah after Bloomberg News reported Prabowo planned to boost the debt-to-GDP ratio to 50% within his five-year term.
His advisers subsequently denied this and repeatedly promised Prabowo will comply with Indonesia’s fiscal laws limiting the annual budget deficit to a maximum 3% of GDP and debt-to-GDP at 60%.
“Prabowo will not add to national public debt abruptly, [and] not drastically,” Hashim said.
“We will remain prudent, but we will be daring, more aggressive, so we can fulfill our (campaign) promises,” he added.
Prabowo’s key campaign pledge is to provide free meals to more than 80 million children and pregnant mothers across Indonesia, which is estimated to cost $28.73 billion to implement.
