Good News! Indonesia's Foreign Debt Was Cut By Rp75 Trillion In A Month: The Ratio To GDP Is 29.6 Percent

JAKARTA Bank Indonesia (BI) reported that Indonesia's total foreign debt (ULN) at the end of October 2022 reached US$ 390.2 billion. This amount is called the Head of the BI Communications Department Erwin Haryono, which is lower than September 2022 which amounted to US$395.2 billion.

This means that the value of Indonesia's foreign debt has shrunk by around 5 billion US dollars in just one month or equivalent to Rp75 trillion at an exchange rate of Rp14,800 (exchange rate of 2023).

"This development is caused by a decline in the external debt of the public sector (government and central bank) and the private sector," he said when delivering a press statement on Thursday, December 15.

According to Erwin, the annual position of external debt in October 2022 contracted by 7.6 percent year on year (yoy), deeper than the contraction in the previous month which was 6.8 percent.

Erwin detailed that the government's total external debt amounted to 179.7 billion US dollars. This figure is sloping from the previous month which amounted to 182.3 billion US dollars.

"The decline in government external debt is due to the shift in the placement of non-resident investor funds in domestic Government Securities (SBN) in line with uncertainty in the high global financial market," he said.

In addition to investors who lift up suitcases the government's obligation is also influenced by higher debt repayments compared to loan withdrawals to support program financing and priority projects.

"The withdrawal of external debt in October 2022 will continue to be directed at financing the productive sector and strived to continue to accelerate the National Economic Recovery (PEN) program," he said.

He also ensured that the government remains committed to maintaining credibility by fulfilling the obligation to pay principal and interest on time, as well as managing external debt carefully, credible, and accountably.

"The government's external debt position is relatively safe and under control considering that almost all of them are long-term external debt with a share reaching 99.9 percent of the total," he added.

Meanwhile, private external debt also continues the downward trend. The position of private external debt in October 2022 was 202.2 billion US dollars, a decrease compared to the previous month's position of 204.7 billion US dollars.

Erwin said the development was caused by net payments of loans and debt securities so that external debt financial institutions (financial companies) and non-financial companies (non-financial companies).

Meanwhile, based on the sector, the largest private external debt comes from the financial and insurance services sector, the electricity, gas, steam/hot water, and cold air supply, the mining and quarrying sector, and the manufacturing industry sector with a share of 78 percent of total private external debt.

"Private external debt also remains dominated by long-term external debt with a share of 75.2 percent of total private external debt," he explained.

Erwin added that the structure of Indonesia's external debt remains healthy, supported by the application of prudential principles in its management and is controlled with a ratio to GDP of 29.6 percent, a decrease compared to the ratio in the previous month of 30.1 percent.

In addition, the structure of Indonesia's external debt remains healthy, shown by Indonesia's external debt which remains dominated by long-term external debt, with a share reaching 87.1 percent of the total.

"In order to keep the external debt structure healthy, Bank Indonesia and the government continue to strengthen coordination in monitoring developments, supported by the application of prudential principles in its management. The role of external debt will also continue to be optimized in supporting development financing and encouraging national economic recovery, by minimizing risks that can affect economic stability," Erwin concluded.