MEASURING THE SUSTAINABILITY OF INDONESIA’S PRIMARY BALANCE: A FISCAL RESPONSE TO THE GOVERNMENT’S FOREIGN DEBT AND MACROECONOMIC FACTORS

Zilhayati, Ramadhani (2025) MEASURING THE SUSTAINABILITY OF INDONESIA’S PRIMARY BALANCE: A FISCAL RESPONSE TO THE GOVERNMENT’S FOREIGN DEBT AND MACROECONOMIC FACTORS. S1 thesis, Universitas Andalas.

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Abstract

This research aims to analyze the Sustainability of the Indonesian Government’s Primary balance as a fiscal response to Government Foreign Debt and Macroeconomic factors using the fiscal reaction function approach, and Autoregressive Distributed Lag (ARDL) and Nonlinear ARDL (NARDL) models. The data used is monthly data for the period 2015–2024, sourced from Bank Indonesia, the Ministry of Finance, and BPS. The results show that the primary balance exhibits strong persistence. However, the government’s fiscal response to past debt positive was not statistically significant, suggesting a weak direct adjustment. Other macroeconomic variables, such as the IPI, IR, and INF, also did not significantly affect the primary balance. The relationship between interest rate and economic growth (r < g) implies that Indonesia’s debt dynamics remain manageable even with limited fiscal adjustment.

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