Indonesia's Prabowo to allow debt-to-GDP ratio to reach 50%, FT reports 

Indonesian President-elect Prabowo Subianto will allow the nation's debt-to-GDP ratio to rise to 50%, provided his administration can boost tax revenue, the Financial Times reported citing one of his closest advisers. 

Prabowo's brother and adviser Hashim Djojohadikusumo told the Financial Times in a London interview that Indonesia could retain its investment-grade credit rating even if the debt-to-gross domestic product (GDP) ratio rises to 50%. 

"The idea is to raise the revenue and raise the debt level," Hashim was quoted as saying in the article. 

"We don't want to raise the debt level without raising revenue," Hashim said, pointing to "taxes, excise taxes, royalties from mining and import duties". 

The incoming government will maintain the status quo on the debt-to-GDP ratio, Sufmi Dasco Ahmad, the head of a team working on synchronizing Prabowo's policy agenda with the current government, told Reuters on Thursday. 

Dasco also said the new government will keep the fiscal deficit under the limit of 3% of GDP. 

"The fiscal policy will be used as a tool to boost private sector investment," Dasco said. 

The fiscal deficit under Prabowo's administration will be under 3% while the debt-to-GDP ratio will be maintained at around 40%, Airlangga Hartarto, chief economic minister and senior official at Prabowo's camp, told reporters on Thursday. 

His team previously denied a media report that Prabowo planned to increase debt-to-GDP levels from under 40% to 50%. They said at the time the incoming president would continue to abide by existing fiscal rules. 

Under those rules, the government's budget deficit is capped at 3% of GDP and the debt-to-GDP ratio cannot exceed 60%. 

Concerns about Prabowo's borrowing plans weighed on bond prices and the rupiah last month, helping knock the currency to four-year lows against the U.S. dollar. 

During campaigning, Prabowo had said he wanted to raise the public debt level while also pledging to boost the tax-to-GDP ratio to 16% from around 10%. He will take office in October. 

Earlier this week, Tempo magazine reported Prabowo had formed a team to explore ways to remove the fiscal deficit and debt-to-GDP ratio ceilings to fund campaign pledges. His adviser for fiscal matters told Reuters he was not aware of any discussion to remove fiscal gap and debt ceilings. 

Source: Reuters 

Jokowi could delay move to Nusantara; lack of water and electricity mark slow progress in Indonesia's new capital 

Indonesia president Joko Widodo had earlier expressed confidence he would be able to work from his new office in East Kalimantan by early July. 

President Joko Widodo looks set to delay plans to work from Indonesia’s new capital Nusantara amid a scramble to get its supply of drinking water and electricity up and running. 

Mr Widodo, popularly known as Jokowi, had earlier expressed confidence he would be able to work from his new office in East Kalimantan by early July. 

His pledge to work from there was widely seen as a move to shore up confidence in the mega project following the resignation of Nusantara Capital Authority head Bambang Susantono and his deputy Dhony Rahajoe in June.  

The US$32 billion project has struggled to attract investors and experienced delays, with key infrastructure yet to be completed weeks before Indonesia’s Independence Day celebrations on Aug 17. 

Those overseeing the project, including the public works and housing ministry, have informed the president that basic infrastructure is still not ready, Mr Widodo told the media in Jakarta on Monday (Jul 8). 

"Is the water ready? Is the electricity ready? Is the place ready? If everything is ready, we will move," said Mr Widodo, as quoted by news outlet Kompas.com. 

A presidential decree to formally declare Nusantara – also known as Ibukota Negara or IKN – the nation’s capital will depend on the project’s progress and could be issued by his successor Prabowo Subianto, Mr Widodo added. 

Mr Subianto will be sworn in as president in October, with Mr Widodo’s son Gibran Rakabuming Raka serving as vice-president. 

"The presidential decree could be before or after October. We see the situation on the ground. We don't want to force something that is not yet (ready); don't force it," Mr Widodo said. 

Jakarta provincial secretary Joko Agus Setyono, however, said on Tuesday that the presidential decree regarding the capital relocation could be expected within the next few days, or next week.  

Some basic infrastructure like supply of drinking water will be available in Nusantara by Jul 15, said Mr Basuki Hadimuljono, acting head of Nusantara Capital Authority and Minister of Public Works and Public Housing. Mr Basuki added that he would conduct checks there on Jul 19. 

According to targets previously announced, Nusantara’s infrastructure to be completed this month include the presidential office, the presidential palace, four three-storey office complexes for the coordinating ministers, and a dedicated field where the Independence Day commemoration would take place.  

Housing for all 36 ministers, as well as 12 of the 47 residential towers for civil servants were also targeted for completion. About 12,000 civil servants from 38 ministries and institutions were expected to move to Nusantara by September, marking the first phase of the plan to populate the new capital.  

The final stage of Nusantara’s construction is slated to be completed by Indonesia’s centennial in 2045. 

Source: CNA 

RI considers revoking bauxite export ban 
 
 

The Energy and Mineral Resources Ministry is mulling over a plan to again allow bauxite ore exports following a call from the House of Representatives to repeal a ban on shipments as part of a larger effort to improve the economic development of bauxite-mining regions.  

Maman Abdurrahman, deputy chair of House Commission VII overseeing energy and mineral resources, said during a hearing broadcast live on Monday that the House “strongly encourages” the energy minister to revoke the rule, suggesting that the ministry instead rely on limited export quotas.  

Energy ministry spokesperson Agus Cahyono Adi said the ministry would follow up with lawmakers’ suggestion to reassess the policy.  

“It is true [that the energy ministry] will carry out inter-ministerial studies and coordination,” he said on Tuesday, as reported by Bisnis. 

The government banned exports of bauxite and copper in June 2023 following a similar policy imposed on nickel mining firms in early 2020.  

In the case of bauxite, the government would like for more of the commodity to be domestically processed into alumina, which is the core raw material for aluminum.  

Local mining companies have opposed the ban, asking the government to give them leeway over concerns that halting shipments might force them to cut production and lay off thousands of workers. 
 
 

Indonesian Mining and Energy Forum (IMEF) chairman Singgih Widagdo said the government had to properly monitor the establishment of bauxite smelters in the country before revoking the export ban, given that Indonesia does not have a significant influence on global bauxite prices.  

“So, before the export policy is revoked, the steps that must be taken are, first, mapping the progress of existing smelters and simultaneously speeding up [bauxite processing facility development] by establishing consortiums,” Singgih said on Tuesday, as quoted by Bisnis.  

He went on to say that the government must consider the industrial development of bauxite derivative products, which is related to efforts to reduce bauxite imports.  

Miners have also pointed to a mismatch between national bauxite output and the existing smelters’ input capacities, arguing that, at current production levels, banning exports would result in around 17 million tonnes of bauxite left unprocessed.  

The Energy and Mineral Resources Ministry estimated that domestic bauxite production reached 31 million tonnes in 2023, far exceeding the nationwide smelter capacity of only 14 million tonnes.  

Producers also called on the government to impose a price floor to control how much smelters must pay for bauxite, as well as a push for local banks to provide more funding for smelter development, to lessen their pain. 

Source: The Jakarta Post