On an annual basis, the external debt position in the second quarter of 2022 contracted by 3.4 percent (year-on-year/yoy), deeper than the contraction in the previous quarter of 0.9 percent (yoy).

Jakarta (Indonesia Window) – Bank Indonesia (BI) recorded the country’s foreign debt at the end of the second quarter of 2022 amounting to 403.0 billion US dollars, down from the position in the previous quarter with a value of 412.6 billion dollars.

This development was caused by a decline in the position of foreign debt in the public sector (the government and the central bank/BI) and the private sector, Head of the BI’s Communications Department Erwin Haryono said in a statement here on Monday.

According to Erwin, on an annual basis, the external debt position in the second quarter of 2022 contracted by 3.4 percent (year-on-year/yoy), deeper than the contraction in the previous quarter of 0.9 percent (yoy).

The downward trend in the government's foreign debt in the second quarter of 2022 continued, he said, adding that the position of the government's foreign debt in the second quarter of this year was 187.3 billion dollars, down from the previous quarter's foreign debt of 196.2 billion dollars.

He continued that on an annual basis, the government's foreign debt contracted by 8.6 percent (yoy), deeper than the contraction in the previous quarter of 3.4 percent (yoy).

The decline in the position of the government's foreign debt was partly due to the repayment of bilateral, commercial and multilateral loans maturing during the period April to June 2022, he explained.

The repayment of maturing domestic state securities also contributed to the decline in the government's foreign debt in the quarter under review, Erwin noted.

In addition, volatility in global financial markets which tends to be high also affects the shift of the domestic investment of state securities to other instruments, thereby reducing the share of ownership of non-resident investors in domestic state securities.

Erwin further said that the withdrawal of foreign debt in the second quarter of 2022 was still prioritized to support the government's priority spending, including efforts to deal with Covid-19 and the National Economic Recovery program.

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

The support of the government foreign debt in meeting priority spending needs in the second quarter of 2022 includes, among others, the health services sector and social activities (24.6 percent of the total government foreign debt), the education services sector (16.6 percent), the sectors of the government administration, defense, and compulsory social insurance (15.1 percent), the construction sector (14.2 percent), and the financial services and insurance sector (11.7 percent).

He stated that the position of the government foreign debt is relatively safe and under control considering that almost all foreign debts have long-term tenors with a share of 99.7 percent of the government's total foreign debt, he said.

The private foreign debt declined compared to the previous quarter. The position of private foreign debt in the second quarter of 2022 was recorded at 207.1 billion dollars, slightly down from 207.4 billion dollars in the first quarter of 2022.

On an annual basis, the private foreign debt contracted 1.1 percent (yoy), lower than the contraction in the previous quarter of 1.5 percent (yoy).

This development was caused by the foreign debt of financial corporations which contracted 0.2 percent (yoy), lower than the previous quarter which recorded a contraction of 5.0 percent (yoy).

Meanwhile, non-financial corporations' foreign debt contracted by 1.3 percent (yoy), deeper than the 0.5 percent (yoy) contraction in the previous quarter.

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

This foreign debt remains dominated by long-term foreign debt with a share of 74.5 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 the second quarter of 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 31.8 percent, or decreased compared to the ratio in the previous quarter of 33.8 percent.

In addition, the structure of Indonesia's foreign debt remains healthy, as demonstrated by Indonesia's foreign debt which remains dominated by long-term external debt, with a share of 86.7 percent of the total foreign debt.

In order to maintain a healthy foreign debt structure, Bank Indonesia/the central bank 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 foreign debt was also expected to be optimized in supporting development financing and promoting national economic recovery, by minimizing risks that may affect the economic stability.

Reporting by Indonesia Window