Indonesia's foreign debt position at the end of July 2022 was recorded at 400.4 billion U.S. dollars, down from the position in the previous month of 403.6 billion dollars.

Jakarta (Indonesia Window) – Indonesia's foreign debt position at the end of July 2022 was recorded at 400.4 billion U.S. dollars, down from the position in the previous month of 403.6 billion dollars, according to the central bank, Bank Indonesia (BI).

This development was caused by a decrease in the foreign debt from the public sector (the government and the central bank) as well as the private sector, the Head of BI’s Communications Department, Erwin Haryono, said in a written statement received here on Thursday.

On an annual basis, the position of foreign debt in July 2022 contracted by 4.1 percent (year-on-year/yoy), deeper than the contraction in the previous month of 3.2 percent (yoy), Erwin said.

The government's foreign debt in July 2022 continued the downward trend, he noted, adding that the position of the government's foreign debt in July 2022 was 185.6 billion dollars, lower than the previous month's position of 187.3 billion dollars.

On an annual basis, the government's foreign debt contracted by 9.9 percent (yoy), deeper than the contraction in June 2022 which was 8.6 percent (yoy), he said.

According to Erwin, the decline in the government's foreign debt occurred due to a shift in the placement of funds by non-resident investors in the domestic State Securities (SBN) market in line with the high uncertainty in global financial markets.

Meanwhile, loan instruments experienced an increase in position from the previous month which were used to support the program and project financing, both for handling the Covid-19 pandemic, the infrastructure development as well as for the construction of other projects and programs.

Withdrawal of the foreign debt carried out in July 2022 is still directed at financing the productive sector and to continue accelerating the National Economic Recovery.

The government foreign debt support in meeting the financing of the productive sector and priority expenditure needs includes, among others, the sectors of health services and social activities (24.5 percent of the total government foreign debt), the education services sector (16.5 percent), the sectors of government administration, defense, and insurance and compulsory social services (15.1 percent), the construction sector (14.2 percent), and the financial services and insurance sector (11.8 percent).

The government remains committed to maintaining credibility by fulfilling obligations to pay the principal and interest on debt in punctually, as well as managing the foreign debt in a prudent, credible and accountable manner.

Erwin explained that the position of the government's foreign debt is relatively safe and under control in terms of short-term refinancing risk, considering that almost all of them are long-term foreign debt with a share of 99.7 percent of the total government foreign debt.

Meanwhile, the private foreign debt also continued a downward trend. The position of the private foreign debt in July 2022 was recorded at 206.3 billion dollars, a decrease from the previous month's position of 207.7 billion dollars.

On an annual basis, the private foreign debt contracted 1.2 percent (yoy), deeper than the contraction in the previous month of 0.7 percent (yoy).

This development was caused by the contraction of the foreign debt of financial corporations and non-financial corporations by 2.0 percent (yoy) and 0.9 percent (yoy) respectively, mainly due to net payments of debt securities.

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

The foreign debt remains dominated by long-term foreign debt with a share of 74.7 percent of the total private foreign debt.

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

Indonesia's foreign debt in July 2022 remained under control, as reflected in the ratio of Indonesia's foreign debt to the Gross Domestic Product (GDP) which was maintained at around 30.7 percent, down from the ratio in the previous month of 31.8 percent.

In addition, the structure of Indonesia's foreign debt remains healthy, as indicated by the country’s foreign debt which remains dominated by long-term foreign debt, with a share of 86.8 percent of the total foreign debt.

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

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

Reporting by Indonesia Window