Government Collects Rp224.8 Trillion in New Debt in First Quarter of 2023

Indonesia's Foreign Debt

The government has been raising new debt in the first three months of this year, with a total of Rp224.8 trillion ($15.3 billion) collected, representing 32.3% of the target and an increase of 49.8% compared to the same period last year. The funding includes the issuance of government bonds worth Rp217.6 trillion and loans amounting to Rp7.2 trillion.

The Finance Minister, Sri Mulyani Indrawati, explained that this step was taken to anticipate potential risks, especially from the unpredictable global dynamics.

“We took a position before the overall increase in interest rates on all financing. We are still on track this year with Rp696 trillion, and the realization until March of Rp224.8 trillion is up from last year, but it’s because of the strategy to keep a buffer for the government,” she said during a press conference on the state budget on Tuesday.

Mulyani emphasized that the issuance of debt was done with caution, taking into account market conditions and the government’s cash position and financing needs.

“Below the line financing is done while maintaining prudent flexibility because of the extraordinary global dynamics; we are cautious in issuing debt,” she added.

Meanwhile, Bank Indonesia (BI) reported that Indonesia’s foreign debt in February 2023 was US$ 400.1 billion or equivalent to Rp5,881.47 trillion ($400.1 billion), down from US$ 404.6 billion the previous month.

BI noted that the decline in foreign debt was due to the reduction in public sector foreign debt (government and central bank) as well as private sector foreign debt.

According to BI’s website, the annual contraction of foreign debt in February 2023 was 3.7% YoY, deeper than the 2.0% YoY contraction the previous month.

The government’s foreign debt position in February 2023 was recorded at US$192.3 billion, lower than the previous month’s position of US$194.3 billion. In addition, the annual contraction of government foreign debt grew deeper, from 2.5% YoY in January 2023 to 4.4% YoY in February 2023.

The Indonesian government has been raising new debt aggressively to fund its budget deficit amid the ongoing COVID-19 pandemic, which has adversely affected the country’s economic growth.

However, the government has taken a cautious approach in issuing debt to manage potential risks and ensure that its debt remains sustainable.

Despite the increase in new debt, Bank Indonesia reported a decline in Indonesia’s foreign debt position in February 2023, primarily due to the reduction in public sector foreign debt and private sector foreign debt.

This indicates that the government’s strategy of managing debt sustainability and risks is having a positive effect.