JAKARTA: Indonesia's President-elect Prabowo Subianto will increase the country's debt-to-GDP ratio level gradually, alongside efforts to boost tax revenues, his top adviser and brother Hashim Djojohadikusumo told a seminar on Monday (Oct 7).
The increase may be within a range of 1 to 2 percentage points per year, he said, describing Indonesia's current debt-to-GDP level of under 40% as "underleveraged".
Investors and rating agencies are closely monitoring Prabowo's fiscal plans after his earlier comments suggesting an appetite for higher debt levels to fund his costly campaign promises triggered concern about potential fiscal slippage.
In June, capital outflows hit the rupiah after Bloomberg News reported Prabowo planned to boost the debt-to-GDP ratio to 50% within his five year term.
Prabowo has promised to comply with Indonesia's fiscal laws limiting the annual budget deficit to a maximum 3% of GDP and debt-to-GDP at 60%.
"Prabowo will not add to national public debt abruptly, not drastically," Hashim said.
"We will remain prudent, but we will be daring, more aggressive, so we can fulfil our (campaign) promises," he added.
Prabowo's key campaign pledge is to provide free meals to more than 80 million children and pregnant mothers across Indonesia, which is estimated to cost 450 trillion rupiah (US$28.73 billion) to implement.
Hashim said increasing revenue is important before the government takes on more debt and that he had consulted Prabowo's plans for tax reform with the World Bank several times in order to raise the revenue-to-GDP ratio to 23%, from an estimate of 12% this year.
Prabowo will spin off the tax and customs offices from the finance ministry and set up a new revenue collection agency, which will use artificial intelligence and other technology to boost tax collection, Hashim said.
"We will achieve that (the revenue target) without increasing tax rates," he said.
Prabowo will be sworn in on Oct 20. - Reuters
