Why Global Rating Agencies Cap Debt-to-GDP at 60% Draws Challenge From Jakarta

JAKARTA, Investortrust.id — Coordinating Minister for Economic Affairs Airlangga Hartarto challenged international credit rating agencies on Tuesday, questioning the rationale behind imposing a strict 60% debt-to-GDP threshold on Southeast Asia’s largest economy while allowing global peers to run far looser balance sheets.

Speaking at the Big Downstream Insights 2026 forum in Jakarta, Airlangga highlighted that Indonesia maintains an enviable fiscal posture compared to major developed and emerging economies. Indonesia’s state budget deficit remains securely below 3% of gross domestic product (GDP), while sovereign debt stands at approximately 41% of national output.

Emerging markets face a persistent double standard in international capital markets, where credit assessors penalize developing sovereigns for debt levels that advanced economies exceed times over. Challenging these rating constraints highlights Jakarta’s push for greater borrowing room to finance expansive industrialization and infrastructure, especially as domestic debt metrics remain disciplined and foreign demand for Indonesian paper stays firm.

Airlangga drew sharp comparisons to global peers running far heavier debt loads. The United States operates with a budget deficit near 5.8% and a debt-to-GDP ratio of 123.3%, while India carries an fiscal deficit of 4.4% alongside an 83.1% debt ratio. Regional neighbor Singapore posts an fiscal surplus of 1.9% while holding a debt-to-GDP ratio reaching 171.3%.

"If others are permitted, why is Indonesia not allowed? What is actually going on? Is it economics? Is it beyond economics?" Airlangga asked attendees during the conference on Tuesday, Oct. 6, 2026.

The minister emphasized that domestic economic momentum remains solid, expanding 5.45% during the first half of 2026. Manufacturing served as the primary growth engine, with the non-oil and gas processing industry growing 5.32% to contribute 16.83% of national GDP.

Soothing Rating Agency Anxieties

To ease external credit concerns, Airlangga said the government is deploying a comprehensive commodity downstreaming roadmap spanning 28 commodities across eight strategic sectors. The strategy focuses on maximizing value addition in forest- and plantation-based renewables—including over 200 palm oil derivative products and crumb rubber—alongside non-renewable minerals and coal, while reviving automotive, textile, and fast-moving consumer goods manufacturing to lift industry's GDP share above 20%.

Airlangga’s critique arrives as the sovereign debt ledger demonstrates strong absorption and investor appetite. Finance Minister Suahasil Nazara reported that government debt issuance totaled Rp 506 trillion ($31.82 billion) through Aug. 31, 2026, representing 60.8% of the full-year allocation.

Net government bond (SBN) issuances reached Rp 527.4 trillion ($33.17 billion), accounting for 66% of the 2026 state budget target. The benchmark 10-year sovereign bond yield stood at 7.17% in mid-September, maintaining a tight spread of 217 basis points over 10-year U.S. Treasuries, which Suahasil highlighted as favorable compared to emerging peers like the Philippines, Brazil, and Mexico.

That competitive yield buffer has kept foreign capital moving into domestic assets. Foreign portfolio inflows into government bonds reached Rp 33.8 trillion ($2.13 billion) between the third quarter and Sept. 10, accompanied by Rp 7.6 trillion ($477.99 million) in Bank Indonesia Rupiah Securities (SRBI) and Rp 2.9 trillion ($182.39 million) in equities.

Investor interest also held firm in primary auctions, with average bid-to-cover ratios touching 1.88 times for conventional sovereign notes (SUN) and 2.53 times for sovereign Islamic bonds (SBSN).

Beyond debt management, public financing has channeled Rp 62.6 trillion ($3.94 billion) into state investment vehicles through August. Key disbursements included Rp 22.7 trillion ($1.43 billion) to state logistics agency Bulog for staple food price stabilization, Rp 15 trillion ($943.40 million) to education fund LPDP, and Rp 9.6 trillion ($603.77 million) to asset management agency LMAN for strategic land acquisition, reinforcing public balance-sheet support for long-term domestic infrastructure.