New Government Reportedly Plans To Raise Debt-To-GDP Ratio To 50%.

Bloomberg has reported that incoming Indonesian President Prabowo (who will come into office later this year) will steadily raise the country's debt to GDP ratio to 50%, from the current -39%. See this link for more details.

• The Newswire notes " He aims to raise the debt-to-gross domestic product ratio by 2 percentage points annually over the next five years, according to people familiar with the matter."
• It adds: "Prabowo is focused on how to fit his programs, especially the food and nutrition ones, into the 2025 budget in line with targets set by the current government while ensuring fiscal prudence, said Thomas Djiwandono, a member of the president-elect’s economic transition team."
• There has been speculation around increased government spending by the new administration, with focus likely to rest on how new funds would be spent. If it boosts Indonesia's long term growth outlook, there may be less fallout from the news from a market sentiment standpoint.
• Part of Prabowo's spending plan is aimed at providing free lunches for children, along with other welfare programs.
• Foreign ownership of Indonesia government bonds is lower in 2024 to date, but above 2022 lows in an outright IDR sense, see the chart below.
• INDON yields have moved 10-30bps tighter over the past month, with the belly of the curve seeing the most demand, while the ID-US 7yr spread difference has held steady over the same period.

Fig 1: Foreign Ownership Of Indonesia Government Bonds

Source: MNI - Market News/Bloomberg