Indonesia's Foreign Debt Soars Rapidly As Of The End Of January 2025

Illustration. (Photo: Doc. Antara)

JAKARTA - Indonesia's foreign debt (ULN) position as of the end of January 2025 was US$427.5 billion, an increase of 5.09 percent compared to January 2024 or year on year (yoy) which amounted to US$406.79 billion. The rate of increase has been relatively high over the last few years, which has even decreased.

Meanwhile, Indonesia's external debt consists of Government, Bank Indonesia and Private, namely Government external debt of 204.79 billion US dollars, Bank Indonesia external debt of 28.34 billion US dollars, and private external debt of 194.39 billion US dollars.

On an annual basis when compared to the position at the end of January 2024, the three of them experienced different changes, namely Government external debt increased by 5.34 percent, Bank Indonesia's external debt jumped 93.94 percent, and private external debt only decreased by 1.71 percent.

However, Bright Institute Economist Awil Rizky assessed that the increase in total external debt by 5.09 percent was still quite reasonable or relatively under control, but if you look at the details, then there are several things that need to be observed.

Awalil explained that the Government's external debt had increased quite rapidly even though during the previous few years, the increase was quite sloping below 5 percent, and even decreased in several months and years.

"The cause of the decline in Government external debt, among others, is because there are many debts to Bank Indonesia, in the form of Government Securities (SBN)," he said in his statement, Selesa, March 18.

Awalil explained that apart from BI, banks are still buying SBN, as well as domestic pension and insurance funds, as well as individuals, including BPJS for employment and Hajj Funds.

According to him, the Government's external debt has the potential to continue to increase more rapidly over the coming year and the sources of funds owned and allocated for the purchase of SBN from banks and others are increasingly limited.

However, Awalil said that only Bank Indonesia still relatively has a source of funds for the purchase of SBN, including willing to revolving due.

Awalil said that the fastest increase in external debt was Bank Indonesia's external debt, which almost doubled for a year or even, seen for 5 years, had increased by about 10 times from January 2020's position of only 2.82 billion US dollars.

Whereas in the same period, Awalil explained that the Government's external debt fell 0.08 percent and Private external debt fell 3.59 percent.

"The first surge in Bank Indonesia's external debt occurred in August 2021 when it was forced to be in debt by the International Monetary Fund (IMF). The IMF divided foreign exchange reserves to all its members according to the stock quota, but recorded them as their respective central bank debts," he explained.

Meanwhile, BI's external debt position as of July 2021 was USD 2.84 billion to USD 9.17 billion as of August 2021.

Awalil said that the next rate of increase in Bank Indonesia's external debt was mainly due to the issuance of the Bank Indonesia Rupiah Securities (SRBI) since September 2023.

To note, SRBI is an instrument of debt securities issued by BI in a short period, including 6 months, 9 months and 12 months, where SRBI purchased by foreign parties is listed as external debt.

As an illustration, SRBI's position as of the second week of September 2023 when it was published was only IDR 24.46 trillion, but by the end of January 2025 it had reached IDR 893.97 trillion.

However, foreign ownership, which was recorded as BI external debt, was only around 25 percent. Awalil said that this had an impact on the surge in BI external debt to 28.34 billion US dollars as of the end of January 2025.

Meanwhile, private external debt actually decreased by 1.71 percent in the past year from 197.77 billion US dollars as of January 2024 to 194.39 billion US dollars as of January 2025.

"This dynamic continues the pattern for the last 5 years, where private external debt tends to decline, although slowly," he explained.

Awalil said that one of the reasons was that the Indonesian private sector optimized bank loans and bond sales that were absorbed by the domestic market because they were related to the increasing volatility of the rupiah value and tended to weaken.

"Hedging mechanisms do not completely solve problems and have an impact on additional costs for them," he said.

However, Awalil estimates that in the next year, private external debt will increase again due to competition in obtaining sources of domestic funds that are getting heavier, including SBN and SRBI factors.

Therefore, Awalil predicts foreign sources have the potential to be relied on again, provided that the value of the rupiah is relatively stable.

"The potential for increasing private external debt also comes from Danantara as a BUMN holding company if it has started operating. One of the things that Danantara hopes is the entry of foreign investment, including debt. Both in the form of loans or debt securities (bonds) of the Danantara and BUMN," he explained.