Sri Mulyani Wants Indonesia's Credit Rating to Rise to Single A, Tax Ratio is the Key

SOVEREIGN DEBT - JAKARTA.  JAKARTA. Indonesia's Finance Minister, Sri Mulyani Indrawati, is hopeful that the country's credit rating will rise to a single A.

However, Sri Mulyani stated that to reach this level, Indonesia's tax ratio, or tax ratio, needs to be improved. Understandably, Indonesia's current tax ratio is still not up to par and is low compared to other countries, such as those in the G-20.

"We hope that one day Indonesia can soon achieve a single A. One of the requirements to become a Single A is that we can improve our tax ratio. And that is a hard task," said Sri Mulyani during a meeting with the Commission XI of the Indonesian House of Representatives, on Thursday (6/6).

Sri Mulyani noted that despite the economic conditions in Indonesia being hit by the Covid-19 pandemic, fluctuations in commodity prices, and increased infrastructure spending, the country's credit rating position remains relatively stable and positive.

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"From a credit rating perspective, even though we have been hit by the pandemic, commodity prices have fluctuated, and we have spent a lot on building our infrastructure, Indonesia's credit rating remains relatively stable and positive," she said. 

As is known, disciplined debt management has also supported the assessment results of credit rating agencies (S&P, Fitch, Moody's, R&I, and JCR) which to this day continue to maintain Indonesia's sovereign rating at an investment grade level amidst global economic dynamics and financial market volatility.

For instance, Fitch has once again maintained Indonesia's credit rating at a BBB position with a stable outlook as of March 15, 2024. The country's maintained economic stability and the government's relatively low debt-to-GDP ratio are some of the factors that strengthen Fitch's assessment of Indonesia's positive growth prospects in the medium term.

"So, I convey that Indonesia with this BBB is a good achievement. Despite many turbulences and shocks, Indonesia is still considered to have prudent fiscal management," concluded the Finance Minister.