Fitch Ratings Warns of Rising Medium-Term Fiscal Risks for Indonesia

February 26, 2024, 03.15 PM  | Reporter: Bidara Pink
Fitch Ratings Warns of Rising Medium-Term Fiscal Risks for Indonesia

ILUSTRASI. The Fitch Ratings building is seen in New York May 7, 2010. REUTERS/Jessica Rinaldi

SOVEREIGN DEBT - JAKARTA. The international rating agency Fitch Ratings has also highlighted the results of the 2024 Indonesian presidential election, which so far shows that the pair Prabowo Subianto-Gibran Rakabuming Raka is leading over other presidential and vice-presidential candidates. 

In its latest report, Fitch warns that medium-term fiscal risks will increase. This is because one of Prabowo-Gibran's campaign promises, a program of free school lunches and milk, requires a large budget. 

Fitch Ratings quotes a statement from the Prabowo - Gibran team that the new government will spend an equivalent of 2% of gross domestic product (GDP) each year on this free lunch and milk program. 

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Moreover, Prabowo also hopes to maintain the government's debt ratio to GDP, which is considered high. Fitch Ratings believes this poses a risk to Fitch's baseline projections. 

On the other hand, Prabowo also advocates for efforts to significantly increase the government's revenue-to-GDP ratio in Indonesia. 

Therefore, Fitch Ratings mentions, there is a chance that Indonesia's government debt will gradually decrease. 

However, this is under the assumption that there will be broad support across the new parliament for prudent fiscal policies and a fiscal deficit below 3% of GDP.

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Indonesia's fiscal track record is strong, so Fitch believes there is strong support from the entire political spectrum for an upper limit on the budget deficit. 

For additional information, data from the General Election Commission (KPU) as of February 26, 2024, at 12:00:15 WIB shows that the Prabowo-Gibran pair received as many as 74.71 million votes or 58.84% of the total votes cast. 

As of midday today, the votes entered into the KPU data already cover 77.11% of the total Polling Stations (TPU) in Indonesia. 

Considering that the Minister of Defense and the Mayor of Solo have collected more than 50% of the votes, it is highly likely that there will not be a second round of presidential elections. 


Editor: Syamsul Azhar

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