Prabowo's Fiscal Balancing Act: Debt and Development

Indonesia's President-elect Prabowo Subianto plans to gradually increase the country's debt-to-GDP ratio while boosting tax revenues to fulfill his campaign promises. Concerns have arisen over potential fiscal slippage, but Prabowo's advisers assure compliance with fiscal laws, maintaining a prudent yet aggressive fiscal approach.

Indonesia's President-elect, Prabowo Subianto, aims to cautiously raise the nation's debt-to-GDP ratio, aligning this with initiatives to enhance tax revenue. His brother and top adviser, Hashim Djojohadikusumo, outlined the plan on Monday, suggesting a rise of 1 to 2 percentage points annually from the current 'underleveraged' level of below 40%.

Investors and rating agencies are sensitively attuned to Prabowo's fiscal strategies. Initial remarks about increasing the debt ratio to fund expansive campaign promises, including free meals for children and pregnant mothers, sparked fears of fiscal instability. However, advisers assure adherence to fiscal laws limiting deficits and debt ratios.

Despite the concerns, Prabowo remains committed to his campaign pledges, emphasizing a balance between financial prudence and necessary aggression to implement his ambitious social programs, forecasted to require 450 trillion rupiah ($28.73 billion) over five years.

(With inputs from agencies.)