Indonesia's Net International Investment Liabilities Decreased in Quarter II/2023

JAKARTA – Bank Indonesia (BI) reported that Indonesia's International Investment Position (PII) in the second quarter of 2023 recorded net liabilities which decreased to 253.3 billion US dollars.

Head of BI Communications Department Erwin Haryono said that this figure decreased compared to net liabilities at the end of quarter I/2023 of 254.0 billion US dollars.

"The decrease in net liabilities came from a decrease in the position of Foreign Financial Liabilities (KFLN) which was greater than the decrease in the position of Foreign Financial Assets (AFLN)," he said Monday, September 18.

According to Erwin, Indonesia's KFLN position has declined in line with the decline in foreign debt amidst a continuing direct investment surplus. Indonesia's KFLN position at the end of quarter II/2023 fell 0.6 percent quarter to quarter (qtq) to 716.0 billion US dollars from 720.1 billion US dollars at the end of quarter I/2023.

"The decrease mainly came from the position of portfolio investment obligations and other investments in line with the payment of maturing debt securities and foreign loans," he said.

Meanwhile, the position of direct investment obligations increased as a reflection of investors' optimism regarding domestic economic prospects which remained maintained amidst increasing conditions of global financial uncertainty.

It was stated that the development of KFLN's position was also influenced by the decline in the value of domestic financial instruments in line with the decline in share prices and the strengthening of the US dollar exchange rate against the majority of global currencies, including the rupiah.

Meanwhile, Indonesia's AFLN position declined, influenced by foreign exchange reserve transactions in line with the need for foreign currency to pay government foreign debt and anticipation of banking foreign exchange liquidity.

Erwind said, the AFLN position at the end of quarter II/2023 was recorded at 462.7 billion US dollars, down 0.7 percent (qtq) from 466.1 billion US dollars at the end of the previous quarter.

"This decrease was mainly caused by a decrease in the position of foreign exchange reserve assets which was influenced by the need to pay government foreign debt and anticipated banking foreign exchange liquidity needs in line with increasing economic activity," he stressed.

Meanwhile, the position of direct investment assets, portfolio investments and other investments increased. The decline in the AFLN position was also influenced by the decline in asset prices and the strengthening of the US dollar exchange rate against several currencies in the countries where the assets were placed.

"Bank Indonesia views that the development of Indonesia's PII in the second quarter of 2023 will remain maintained, thus supporting external resilience," he added.

This is reflected in the ratio of Indonesia's PII net liabilities to GDP in the second quarter of 2023 which was in the range of 18.7 percent or lower compared to the previous quarter of 19.0 percent.

Apart from that, Indonesia's PII liability structure is also dominated by long-term instruments (94.2 percent) especially in the form of direct investment. In the future, Erwin ensures that PII Indonesia's performance will remain maintained in line with national economic recovery efforts after the Covid-19 pandemic which is supported by the synergy of the policy mix of Bank Indonesia and the Government, as well as other relevant authorities.

"Nevertheless, Bank Indonesia will continue to monitor potential risks related to PII's net liabilities to the economy," he concluded.