Indonesia’s External Debt in Quarter IV-2022 Remains Under Control

Indonesia's Foreign Debt

At the end of the fourth quarter of 2022, Indonesia’s external debt (ULN) was recorded at US$396.8 billion. According to Bank Indonesia (BI), this figure shows that Indonesia’s debt remains under control. Several factors affect depreciation.

The position of the government’s external debt is relatively secure and under control considering that almost all external debt has long-term tenors with a share of 99.8% of the total government external debt.

With these developments, Indonesia’s external debt growth in the fourth quarter of 2022 on an annual basis contracted by 4.1% (yoy), continuing the contraction in the previous quarter of 6.7% (yoy).

Head of the BI Department Erwin Haryono, Tuesday (14/2/2023), explained several reasons for the contraction. According to him, this growth contraction mainly comes from the government’s external debt and the private sector.

The development of the external debt position in the fourth quarter of 2022 was also influenced by changes due to the weakening of the US dollar against the majority of global currencies.

The government’s external debt position in the fourth quarter of 2022 was recorded at US$186.5 billion, or on an annual basis experienced a contraction of 6.8% (yoy), lower than the contraction in the previous quarter of 11.3% (yoy).

The development of external debt was driven by an increase in portfolio investment in the domestic Government Securities (SBN) market in line with the positive sentiment of global market players’ confidence which was maintained.

Erwin also stated that there was a net drawdown of foreign loans used to support program and project financing.

The government’s external debt plays an important role in supporting the government’s efforts to finance the productive sector and prioritize government spending, including continuing efforts to accelerate the National Economic Recovery (PEN) program.

The government ensures that this External Debt is managed prudently and credibly to support state spending.

The debt is allocated to cover the health services sector and social activities (24.4% of the total government external debt), education services (16.5%), government administration, defense, and mandatory social security (15.5%), construction (14 .2%), as well as financial and insurance services (11.4%).

Thus, Erwin emphasized that the structure of Indonesia’s external debt remains healthy, supported by the application of the prudential principle in its management.

Indonesia’s external debt remained under control in the fourth quarter of 2022, as reflected in the ratio of Indonesia’s external debt to Gross Domestic Product (GDP) which was maintained at around 30.1%, down from 30.3% in the previous quarter.