August 2017, Mining Sector NPL Above 8 Percent

Indonesia's Financial Services Authority (OJK) reported that in August 2017, Non-Performing Loans (NPLs) in the mining sector exceeded 8 percent, reaching Rp 9.33 trillion. This figure is higher than the 7.16 percent recorded at the end of 2016 and significantly above the national banking NPL average of 2.98 percent.

The decline in global crude oil prices from mid-2014 to early 2016, followed by a drop in other mining commodity prices, severely impacted the domestic mining sector. The value of non-performing loans in the mining sector surged by 86 percent in 2014 to Rp 3.57 trillion. Similarly, it increased by 56.21 percent in 2015 to Rp 5.58 trillion and by a further 62 percent in 2016 to Rp 9 trillion.

The NPL percentage in the mining sector jumped to 7.16 percent in 2016, compared to just 2.52 percent the previous year. Numerous mining companies facing financial difficulties and business closures contributed to the significant rise in NPLs in 2016. Meanwhile, investment in the mining sector decreased as businesses remained hesitant to reinvest. This is reflected in the 7.9 percent decline in mining sector credit to Rp 116.34 trillion in August 2017, down from Rp 126.33 trillion at the end of 2016. (Note: There appears to be a discrepancy in the original text regarding the 2016 credit figure; Rp 226.33 trillion has been adjusted to Rp 126.33 trillion to maintain logical consistency.)