Great! Indonesia's External Debt Drops 2.8 Billion US Dollars in a Month, Ratio to GDP to 30.4 Percent

Illustration. (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) reported that Indonesia's External Debt (ULN) in August 2022 declined again by 2.8 billion US dollars in a month. Its value was 397.4 billion US dollars, compared to the previous month's 400.2 billion US dollars.

Director of the BI Communications Department, Junanto Herdiawan, revealed that this development was caused by a decline in public sector external debt, namely the government and central bank, as well as the private sector.

"On an annual basis, the position of external debt in August 2022 experienced a contraction of 6.5 percent (year on year/yoy), deeper than the previous month's 4.1 percent," Junanto said in a written statement, quoted by Antara, Monday, October 17.

The government's external debt position in August 2022 was USD  184.9 billion, lower than the previous month's position of USD 185.6 billion. On an annual basis, the government's external debt contracted 10.9 percent (yoy), deeper than the 9.9 percent in July 2022.

The decline in government external debt was due to a decrease in loans in line with higher loan repayments compared to loan withdrawals in support of financing priority programs and projects.

Meanwhile, net Government Securities (SBN) instruments increased in line with the increase in capital inflows to domestic SBN, reflecting the confidence of foreign investors in the midst of high uncertainty in global financial markets.

The government remains committed to maintaining credibility by fulfilling obligations to pay principal and interest on debt in a timely manner, as well as managing external debt in a prudent, credible and accountable manner. The withdrawal of external debt in August 2022 is still directed at financing the productive sector and encouraging the acceleration of the National Economic Recovery (PEN).

Government external debt support in meeting financing for the productive sector and priority spending needs includes, among others, the health services and social activities sector (24.5 percent), the education services sector (16.6 percent), the government administration sector, defense, and compulsory social security (15 .2 percent), the construction sector (14.2 percent), and the financial services and insurance sector (11.7 percent).

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

In addition, Junanto said that private external debt also continued a downward trend, in August 2022 amounting to USD 204.1 billion, down from USD 206.1 billion in the previous month. On an annual basis, private external debt contracted 2 percent (yoy), more than 1.2 percent in the previous month. External debt contraction of financial institutions and non-financial companies was 3.6 percent (yoy) and 1.6 percent (yoy) respectively, which was partly due to net payments of trade payables and other obligations.

By sector, the largest private external debt comes from the financial and insurance services sector, the electricity, gas, steam/hot water and cold air supply sector, the mining and quarrying sector and the manufacturing industry sector with a share of 77.5 percent of the total private external debt. This external debt remains dominated by long-term external debt with a share of 75.1 percent of total private external debt.

Overall, the structure of Indonesia's external debt remains healthy, supported by the application of prudential principles in its management. Indonesia's external debt last month also remained under control, as reflected in the ratio of Indonesia's external debt to Gross Domestic Product (GDP) which was maintained at around 30.4 percent, down from the ratio in the previous month of 30.7 percent.

In addition, Indonesia's external debt structure remains healthy, as indicated by Indonesia's external debt which remains dominated by long-term external debt, with a share of 87.1 percent of total external debt. In order to maintain a healthy external debt structure, BI and the government continue to strengthen coordination in monitoring the development of external debt, supported by the application of prudential principles in their management.

The role of external debt will also continue to be optimized in supporting development financing and promoting national economic recovery, by minimizing risks that may affect economic stability.