Indonesia's foreign debts in November 2022 contracted by 5.6 percent (year-on-year/yoy), continuing the contraction in the previous month of 7.6 percent (year-on-year/yoy).

Jakarta (Indonesia Window) – The Indonesian central bank, Bank Indonesia (BI), recorded Indonesia's foreign debts at the end of November 2022 of 392.6 billion U.S. dollars.

With this development, the growth of Indonesia's foreign debts in November 2022 contracted by 5.6 percent (year-on-year/yoy), continuing the contraction in the previous month of 7.6 percent (yoy).

The contraction of the growth came from the foreign debts of the public sector (the government and the central bank/BI) and the private sector, the head of BI’s Communication Department, Erwin Haryono, said in his official statement on Monday.

The government's external debt continued the trend of contraction in growth, he said, adding that the government's external debt position in November 2022 was recorded at 181.6 billion dollars, or on an annual basis contracted 10.2 percent (yoy), lower than that in the previous month which amounted to 12 .3 percent (yoy).

The development of the external debt was caused by positive sentiment from global market players' confidence which was maintained, thus encouraging foreign investors to return to placing portfolio investments in the domestic state securities market, he noted.

In addition, there were withdrawals of foreign loans that were used to support program and project financing, including support for handling Covid-19 pandemic, support for infrastructure development, as well as several other development programs and projects, he added.

Withdrawal of the external debt in November 2022 is still prioritized to support the government priority spending, including efforts to deal with Covid-19 pandemic and the National Economic Recovery (PEN) program.

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

The support of the government external debt in meeting priority spending needs until November 2022 included the health services sector and social activities (24.5 percent of the total government external debts), the education services sector (16.5 percent), the sectors of the government administration, defense, and mandatory social services (15.3 percent), the construction sector (14.2 percent), and the financial services and insurance sector (11.5 percent).

The position of the government's external debt is relatively safe and controlled considering that almost all the external debts have long-term tenors with a share of 99.9 percent of the total government external debts.

Erwin explained that the position of the private external debt in November 2022 was recorded at 202.5 billion dollars, or on an annual basis contracted by 0.9 percent (yoy), continuing the contraction in the previous month which was 3.0 percent (yoy).

The development was caused by the growth in the external debts of financial corporations and non-financial corporations, each of which experienced a contraction of 2.0 percent (yoy) and 0.7 percent (yoy), lower than the contraction in the previous month which amounted to 3.4 percent (yoy) and 2.8 percent (yoy).

By sector, the largest private external debts come from the financial services and insurance sector; the electricity, gas, steam/hot water and cold air supply sector; the processing industry sector; as well as the mining sector with a share of 78.1 percent of the total private external debts.

According to Erwin, the private external debt is still dominated by the long-term external debt with a share of 74.8 percent of the total private external debts.

The structure of Indonesia's external debts remai healthy, supported by the application of the precautionary principle in its management.

Indonesia's external debts remained under control in November 2022, as reflected in the ratio of Indonesia's external debts to the Gross Domestic Product (GDP) which was maintained at around 29.7 percent, a slight increase compared to the previous month's ratio of 29.5 percent.

In addition, Indonesia's external debt structure remains healthy, as demonstrated by Indonesia's external debts which are still dominated by the long-term external debts, with a share of 87.0 percent of the total external debts.

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

The role of the external debts is also expected to continue to be optimized in supporting the development financing and encouraging the national economic recovery, by minimizing risks that could affect economic stability.

Reporting by Indonesia Window