Indonesia's foreign debt in January 2023 contracted annually by 1.9 percent (year-on-year/yoy), continuing the contraction in the previous month of 4.1 percent (yoy).

Jakarta (Indonesia Window) – The central bank, Bank Indonesia (BI), recorded Indonesia's foreign debt in January 2023 at 404.9 billion U.S. dollars, an official said.

With this development, Indonesia's foreign debt in January 2023 on an annual basis contracted by 1.9 percent (year-on-year/yoy), continuing the contraction in the previous month of 4.1 percent (yoy), BI’s Executive Director of the Communications Department, Erwin Haryono, said in his written statement, Tuesday.

The contraction was sourced from the foreign debts of the government and the private sector, Erwin said adding that the position of the foreign debt in January 2023 was also influenced by changing factors due to the weakening of the U.S. dollar against the majority of global currencies, including Indonesia’s rupiah.

In that month, the government's foreign debt was recorded at 194.3 billion dollars, or on an annual basis contracted by 2.5 percent (yoy), lower than that in the previous month of 6.8 percent (yoy), he said.

The foreign debt was mainly driven by an increase in portfolio investment placements in the domestic and international state securities markets in line with the positive sentiment in global market players' increasing confidence.

According to Erwin, the government continues to be committed to managing the foreign debt in a prudent, credible and accountable manner, including maintaining credibility in fulfilling obligations to pay the debt principal and interest punctually.

As a component of the financing instruments for the State Revenue and Expenditure Budget (APBN), the foreign debt plays an important role in supporting the government's efforts to finance productive sectors and priority spending, particularly in order to support and maintain Indonesia's economic growth amidst the uncertainty of global economic conditions.

The position of private foreign debt in January 2023 was recorded at 201.2 billion dollars, or on an annual basis contracted by 1.5 percent (yoy), continuing the contraction in the previous month of 1.8 percent (yoy).

The growth of non-financial corporations' foreign debt contracted by 1.1 percent (yoy), lower than that in the previous month of 1.5 percent (yoy).

Meanwhile, the growth of financial corporations' foreign debt contracted by 3.1 percent (yoy), deeper than that in the previous month of 2.7 percent (yoy).

Based on the economic sector, the largest private foreign debt comes from the financial services and insurance sector; processing industry; provision of electricity, gas, steam/hot water, and cold air; as well as mining and quarrying, with a share reaching 77.6 percent of total private foreign debt.

The private foreign debt is also still dominated by long-term external debt with a share of 75.2 percent of total private external debt.

The structure of Indonesia's foreign debt remains healthy, supported by the application of the prudent principle in its management.

Indonesia's foreign debt in January 2023 remained under control, as reflected in the ratio of the country's foreign debt to the Gross Domestic Product (GDP) which was maintained at around 30.3 percent, a slight increase compared to the previous month's ratio of 30.1 percent.

In addition, the healthy structure of Indonesia's foreign debt is also demonstrated by the external debt which remains dominated by long-term external debt, with a share of 87.4 percent of total external debt.

In order to maintain a healthy foreign debt structure, the central bank Bank Indonesia and the government continue to strengthen coordination in monitoring the development of foreign debt, supported by the application of the precautionary principle in its management.

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

Reporting by Indonesia Widow