In a recent article by the Financial Times, it was reported that Prabowo Subianto, the President-elect of Indonesia, plans to allow the nation’s debt-to-GDP ratio to rise to 50%. This decision is based on the condition that his administration can increase tax revenues. While this may seem like a bold move to boost economic growth and development, it raises concerns about the potential risks and implications of such a high debt level.
Prabowo’s brother and adviser, Hashim Djojohadikusumo, mentioned in the article that the focus is on raising both revenue and debt levels. The proposed strategy includes implementing various measures such as taxes, excise taxes, royalties from mining, and import duties. While these measures can potentially increase government revenue, there is no mention of any concrete plans or initiatives to address tax evasion, corruption, and inefficiencies in the tax collection system.
The decision to raise the debt-to-GDP ratio to 50% has raised concerns about the sustainability of Indonesia’s fiscal position. With the existing rules capping the government’s budget deficit at 3% of GDP and the debt-to-GDP ratio at 60%, it is unclear how Prabowo’s proposed plan aligns with these guidelines. The lack of transparency and clarity surrounding his economic policies is troubling and could undermine investor confidence in the country.
The uncertainty surrounding Prabowo’s borrowing plans has already had an impact on the financial markets. Bond prices and the Indonesian rupiah have experienced volatility, with the currency reaching four-year lows against the dollar. This demonstrates the importance of clear and consistent communication from the government to reassure investors and maintain stability in the financial markets.
Despite Prabowo’s ambitious goals to increase public debt levels and tax revenue, there are significant challenges in implementing these policies effectively. The lack of coordination and cooperation between government agencies, as well as the potential resistance from various stakeholders, could hinder the successful implementation of the proposed measures. Without a comprehensive and realistic plan in place, there is a risk that Prabowo’s economic agenda may not yield the desired results.
While Prabowo Subianto’s intention to boost Indonesia’s economic growth through increased debt and tax revenues is commendable, the lack of clarity and coherence in his proposed plan raises questions about its feasibility and sustainability. It is imperative for the incoming administration to provide detailed and well-thought-out policies to address the country’s economic challenges and ensure long-term stability and prosperity.