Until October 2016, Indonesia's debt-to-Gross Domestic Product (GDP) ratio remained quite high. Total government debt at the end of October 2016 was recorded at Rp 3,439.8 trillion. The ratio reached 27.4 percent of GDP. Although it fell in 2014, the debt ratio rose again in 2015. Furthermore, this year's debt ratio still has the potential to rise until the end of December 2016. In accordance with Law Number 17 of 2003 concerning State Finance, the Government limits the government debt ratio to 60 percent of GDP.
Throughout 2016, the government aggressively issued State Bonds (SBN), which were actually sought after by foreign investors. While foreign investors trust SBNs, this situation poses a threat because they can withdraw at any time. Consequently, if foreign investors suddenly sell these SBNs, shocks to the financial sector are certain to occur. Moreover, the aggressive issuance of SBNs has already eroded banking interest rates.
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