The Sustainability of Public Debt and Fiscal Stability in Indonesia
DOI:
https://doi.org/10.38035/dijemss.v7i3.6040Keywords:
Effectiveness of Development Financing, Sustainability of Public Debt, Fiscal Policy, Global Interest Rates, Exchange Rate VolatilityAbstract
The purpose of this study is to analyse the sustainability of Indonesia's public debt under domestic and global fiscal pressures, identify macroeconomic factors that affect fiscal sustainability, and provide strategic recommendations for strengthening credible and sustainable fiscal policies. The research method used is an explanatory quantitative approach with time series data and panel data. The analysis methods used are the Generalised Method of Moments (GMM) to address endogeneity, and the Vector Error Correction Model (VECM) to measure long-term relationships. Indonesia's public debt has continued to increase in recent years, especially after the COVID-19 pandemic, raising concerns about long-term fiscal sustainability. Reliance on debt financing can narrow fiscal space and increase risks to macroeconomic stability. Therefore, it is necessary to conduct an in-depth study on the extent to which current public debt is still within sustainable limits, as well as its impact on national fiscal stability. The results of the study support the Fiscal Sustainability Theory, which asserts that fiscal sustainability is determined by the government's ability to maintain a positive primary balance and control the debt-to-GDP ratio in the long term. Empirical findings show that although Indonesia's debt ratio is still below the safe limit (60%), fiscal sustainability remains fragile if the primary deficit continues to be negative. The urgency of this research lies in sustainable fiscal policy. Increasing external pressures, such as high global interest rates and exchange rate volatility, increase the risk of government debt financing. In addition, spending allocations that are not fully productive can undermine the effectiveness of development financing. Therefore, it is important to scientifically analyse the factors that influence the sustainability of Indonesia's public debt and its impact on national fiscal stability.
References
Afandi, M. F. (2022). Pengaruh Nilai Tukar, Suku Bunga dan Inflasi Terhadap Utang Luar Negeri Indonesia Tahun 2001-2020. Jurnal Ilmu Ekonomi JIE, 6(3), 513–524. https://doi.org/10.22219/jie.v6i3.22297
Afonso, A., & Coelho, J. C. (2025). Fiscal sustainability , fiscal reactions , pitfalls and determinants. Applied Economics, 57(26), 3560–3571. https://doi.org/10.1080/00036846.2024.2337808
Afonso, Antonio; Alves, Jose; Matvejevs, Oļegs;Tkačevs, O. (2023). Fiscal Sustainability and the Role of Inflation (Issue 10843).
Anggresta, V., Subiyantoro, H., & Astuty, P. (2024). Foreign Debt: Causes and Theirs Impact on Economic Growth in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 13(2), 303–310. https://doi.org/10.15408/sjie.v13i2.40681
Azkiya, A., Lutfi, M., Kurniawan, A., & Salim, A. (2025). Structural Cointegration of Exchange Rate , Gross Domestic Product , and External Debt in Indonesia : An Analysis of Macroeconomic Stability with the ARDL – ECM Approach. Ekuilibrium: Jurnal Ilmiah Bidang Ilmu Ekonomi, 20(2), 271–294. https://doi.org/10.24269/ekuilibrium.v20i2.2025.pp271-294
Cahyadin, M., Sarmidi, T., Khalid, N., & Law, S. H. (2023). Public Debt and Budget Deficit Threshold Levels on New Fiscal Sustainability Indicator. Signifikan: Jurnal Ilmu Ekonomi, 12(1), 97–116.
Dinul, A. A., Lutfi, M., & Kurniawan, A. (2024). ANALISIS VARIABEL MAKROEKONOMI TERHADAP UTANG LUAR NEGERI INDONESIA : PENDEKATAN VAR. MODUS, 36(2), 266–281.
Fukunaga, Ichiro; Komatsuzaki, Takuji; Matsuoka, H. (2020). Inflation and Public Debt Reversals in Advanced Economies (Issue January).
Heimberger, P. (2021). Do Higher Public Debt Levels Reduce Economic Growth ? (Issue November).
Insanu, Fana Mustika; Purwanti, E. Y. (2020). Utang pemerintah dan Fiscal Sustainability dalam Paradigma Ricardian Fiscal Regime di Indonesia. Dinamika Ekonomi Pembangunan, 3(1), 31–45.
Kholis, N., & Wahyudin. (2024a). Determinan Ketahanan Pembiayaan Defisit Anggaran Indonesia Tahun 1998–2022. Seminar Nasional Official Statistics 2024, 231–240.
Kholis, N., & Wahyudin. (2024b). Determinan Ketahanan Pembiayaan Defisit Anggaran Indonesia Tahun 1998-2022 (Determinants of Budget-Deficit Financing Sustainability in Indonesia. Seminar Nasional Official Statistics, 231–240.
Kongo, Y. O., Kiano, E. K., Ogada, J. O., & Omboto, P. I. (2023). The Effect of Debt Service Ratio and Exchange Rate on Public Debt Sustainability in Kenya. International Journal of Research and Innovation in Social Science (IJRISS), VII(2454), 302–312. https://doi.org/10.47772/IJRISS
Latifah, E., Sutjipto, H., Mangara, T. H., & Harahap, M. N. (2024). Analysis of Factors Affecting Indonesian Government Debt. Jurnal Ilmu Manajemen Dan Ekonomika, 17(1), 27–48.
Lestari, D. P., & Sakti, R. K. (2024). Fiscal Sustainability in Indonesia: A Fiscal Reaction Function Approach. Journal of Development Economic and Social Studies (JDESS), 3(2), 568–588.
Lestari, Putri Ayu; Andika, C. (2025). Moneta : Journal of Economics and Finance. Moneta : Journal of Economics and Finance, 3(1), 51–63.
Marimuthu, M., Khan, H., & Bangash, R. (2021). Is the Fiscal Deficit of ASEAN Alarming ? Evidence from Fiscal Deficit Consequences and Contribution towards Sustainable Economic Growth. Sustainability, 13(18), 1–24.
Miranda, Mira; Sugiyanto, S. (2025). Dependence On Debt Financing To Cover The Budget Deficit : Implications For Fiscal Sustainability. Jurnal Multidisiplin Indonesia (JOUMI), 3(2), 01–23.
Pulungan, Abdul Manap; Listiyanto, E. (2021). Debt sustainability and debt management in Indonesia – lessons from China. ECIDC Project Paper No.2, 2(November).
Rahman, Y. A., Rahmayani, D., & Hapsoro, B. B. (2023). Public Debt Sustainability in Indonesia after Financial Crisis and During COVID-19 Pandemic. International Journal of Sustainable Development and Planning, 18(1), 229–235. https://doi.org/10.18280/ijsdp.180124
Salahudin, M., Ayyubi, A., Mahardika, P., & Saputra, A. (2021). Indonesian government ’ s primary balance and debt. Jurnal Ekonomi Dan Bisnis (JEB), 24(1), 133–152.
Shi, H., Song, D., & Ramzan, M. (2025). Institutional Quality , Public Debt , and Sustainable Economic Growth : Evidence from a Global Panel. Sustainability, 17(6487), 1–27. https://doi.org/https://doi.org/10.3390/su17146487
Woldu, G. T., & Kanó, I. Szakálné. (2024). Primary surplus dynamics and fiscal sustainability in sub saharan African countries. Economia Politica, 41, 499–519. https://doi.org/10.1007/s40888-024-00336-z
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Lestari Lestari, Nia Tresnawaty, Ranita Puspita Sari Dewi, Hamdalah Riziq R
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish their manuscripts in this journal agree to the following conditions:
- The copyright on each article belongs to the author(s).
- The author acknowledges that the Dinasti International Journal of Education Management and Social Science (DIJEMSS) has the right to be the first to publish with a Creative Commons Attribution 4.0 International license (Attribution 4.0 International (CC BY 4.0).
- Authors can submit articles separately, arrange for the non-exclusive distribution of manuscripts that have been published in this journal into other versions (e.g., sent to the author's institutional repository, publication into books, etc.), by acknowledging that the manuscript has been published for the first time in the Dinasti International Journal of Education Management and Social Science (DIJEMSS).
