The government's foreign debt position is relatively safe and under control in terms of short-term refinancing risk, considering that almost all of it is long-term debt with a share of 99.8 percent of the total.

Jakarta (Indonesia Window) – Indonesia's foreign debt position in May 2022 was recorded at 406.3 billion U.S. dollars, a decrease compared to the previous month's position of 410.1 billion dollars, according to Bank Indonesia (BI).

"This development was caused by a decrease in the external debt position of the public sector (the government and the central bank) as well as the private sector. Annually, the foreign debt contracted 2.6 percent (year-on-year/yoy), deeper than the contraction in the previous month of 2.0 percent (yoy)," the Head of BI’s Communications Department, Erwin Haryono, said in a written statement here on Friday.

He explained that the government's foreign debt in May 2022 amounted to 188.2 billion dollars, a decrease compared to the previous month's position of 190.5 billion dollars.

On an annual basis, the government's external debt contracted by 7.5 percent (yoy), deeper than the contraction in the previous month which was recorded at 7.3 percent (yoy).

"The downward trend in debt occurred in line with several series of Government Securities maturing in May 2022 and the influence of global sentiment that triggered a shift in portfolio investment in the domestic Government Securities market by non-resident investors," he explained.

Meanwhile, foreign loans experienced a slight increase from the previous month, especially bilateral loans from several partner institutions aimed at supporting the financing of several priority programs and projects.

Withdrawal of foreign debt in the May 2022 period was still prioritized to support the government's priority spending and continued to encourage the acceleration of the National Economic Recovery program.

The government's foreign debt support to meet priority spending needs until May 2022 included the health services sector and social activities by 24.5 percent of the total and the education services sector by 16.5 percent.

In addition, the debt for the priority sectors of the government administration, defense and mandatory social security is 15.1 percent, the debt for the construction sector is 14.3 percent, and the debt for the financial services and insurance sector is 11.8 percent.

The government's foreign debt position is relatively safe and under control in terms of short-term refinancing risk, considering that almost all of it is long-term debt with a share of 99.8 percent of the total.

Erwin also explained that the private foreign debt in May 2022, which was recorded at 209.4 billion dollars, decreased from the position in April 2022 of 210.9 billion dollars.

On an annual basis, according to him, the private foreign debt contracted 0.7 percent (yoy), after growing by 0.3 percent (yoy) in the previous month.

The decline was contributed by the debt from non-financial corporations, which contracted by 0.9 percent (yoy), after growing 0.8 percent (yoy) in the previous month.

"This development mainly comes from repayment of maturing loans and debt securities," Erwin noted.

On the other hand, the external debt of financial corporations grew by 0.3 percent (yoy), following a contraction in the previous month of 1.9 percent (yoy).

By sector, the largest private external debt comes from the financial services and insurance sectors; the electricity, gas, steam/hot water, and cold air procurement sectors; the mining and quarrying sector; and the manufacturing sector, with a share of 77.3 percent of the total.

"The foreign debt is still dominated by long-term foreign debt with a share of 74.4 percent of the total private foreign debt," Erwin said.

Overall, Indonesia's external debt structure remains healthy and under control with a ratio of 32.3 percent to the gross domestic product (GDP), a decline compared to the position in April 2022 of 32.6 percent.

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 management.

Reporting by Indonesia Window