Jakarta. Indonesia faces a growing risk of falling into a debt-service trap as government interest payments reached Rp 444.5 trillion ($24.8 billion) in the first nine months of 2026, nearly matching the amount of new debt raised during the same period, an economist warned Sunday.

The interest payments, recorded as of Sept. 30, comprised Rp 413 trillion on domestic debt and Rp 31.5 trillion on foreign debt.

Rizal Taufikurahman, a senior economist at the Institute for Development of Economics and Finance (Indef), said the mounting burden suggests that an increasing share of government spending is being absorbed by existing financial obligations rather than investments that could expand the economy's productive capacity.

He stressed that Indonesia has not yet fallen into a debt trap, but warned that structural fiscal pressures could intensify if additional borrowing fails to generate corresponding increases in economic growth and government revenue.

"Without improvements in spending productivity, debt risks becoming a tool for sustaining government finances rather than driving economic transformation," Rizal said.

Interest Payments Approach 90% of New Borrowing
Government debt financing reached Rp 494.3 trillion by Sept. 30, equivalent to 59.4% of the full-year target of Rp 832.2 trillion.

The Rp 444.5 trillion spent on interest payments was equivalent to approximately 90% of the amount raised through new debt financing over the same period.

Although the two figures serve different fiscal purposes and are not directly interchangeable, Rizal said the comparison illustrates the growing pressure of debt-servicing costs on the state budget.

"This indicates an increasing risk of fiscal crowding-out, in which past obligations progressively displace spending on development and efforts to strengthen the economy's productive capacity," he said.

A debt-service trap can emerge when a government becomes increasingly constrained by the cost of servicing existing debt, leaving less fiscal room for essential public services, infrastructure and productive investment.

Budget Deficit Reaches Rp 319 Trillion
Government data showed that Indonesia's budget deficit reached Rp 319 trillion in the first nine months of 2026, equivalent to approximately 1.24% of gross domestic product.

The primary balance -- which measures the government's fiscal position before interest payments on outstanding debt -- was recorded at a surplus of Rp 125.5 trillion as of September.

Rizal said the figures underscored the importance of managing borrowing costs and strengthening government revenue to ensure fiscal sustainability.

"Without stronger revenue and more efficient financing, even a primary surplus does not guarantee long-term fiscal sustainability," he said.

He urged the government to focus on reducing borrowing costs, managing debt maturities and strengthening the domestic investor base rather than concentrating solely on meeting government bond issuance targets.

"The government must prioritize debt-cost efficiency, maturity management and strengthening the domestic investor base instead of merely pursuing government securities issuance targets," Rizal said.

Calls for More Selective Borrowing
Rizal warned that debt management would need to become more selective in the final quarter of 2026, given rising expenditure requirements, elevated financing costs and continued global economic uncertainty.

He recommended optimizing government cash management, controlling refinancing risks and ensuring that any additional borrowing supports productive spending with substantial economic benefits.

The economist also argued that compliance with Indonesia's statutory budget deficit ceiling of 3% of GDP, while important, should not be treated as the sole measure of fiscal health.

"Fiscal discipline is not simply about keeping the deficit below 3%. It must also ensure that the debt burden remains manageable and that the economy's productive capacity grows faster than its fiscal obligations," Rizal said.

His warning highlights a broader challenge for Indonesia's fiscal policy: balancing the need to finance government priorities with the rising cost of servicing existing debt, while ensuring that borrowing contributes to sustainable economic growth.

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