Indonesia's External Debt Falls Again to US$394.6 Billion in Q3 2022

Bank Indonesia (BI) reported that Indonesia's external debt (ULN) at the end of the third quarter of 2022 was recorded at US$394.6 billion. This ULN decreased compared to the position in the second quarter of 2022, which was US$403.6 billion.

This development was due to a decrease in ULN in the public sector (Government and Central Bank) and the private sector. Year-on-year, the ULN position in the third quarter of 2022 contracted by 7.0% (yoy), deeper than the contraction in the previous quarter, which was 2.9% (yoy).

Specifically, the Government's ULN position in the third quarter of 2022 was US$182.3 billion, lower than the ULN position in the second quarter of 2022, which was US$187.3 billion. Year-on-year, the Government's ULN contracted by 11.3% (yoy), deeper than the contraction in the previous quarter, which was 8.6% (yoy).

The decrease in the Government's ULN position was due to a shift in investment from domestic State Bonds (SBN) to other instruments, thus reducing the portion of non-resident investor ownership in domestic SBN along with increasing uncertainty in the global financial market. The repayment of several maturing program and project loans also contributed to the decrease in the Government's ULN during the reporting period.

Meanwhile, ULN withdrawals in the third quarter of 2022 were still prioritized to support the Government's priority spending, including efforts to handle Covid-19 and the National Economic Recovery (PEN) program. The Government is committed to maintaining credibility by fulfilling principal and interest payments on time, and managing ULN carefully, credibly, and accountably.

Government ULN support in meeting priority spending needs in the third quarter of 2022 included, among others, the health services and social activities sector (24.6% of the total Government ULN), the education services sector (16.6%), the government administration, defense, and mandatory social security sector (15.2%), the construction sector (14.2%), and the financial and insurance services sector (11.6%). The Government's ULN position is relatively safe and controlled, considering that almost all ULN has a long-term tenor with a share reaching 99.9% of the total Government ULN.

Private ULN also continued its downward trend. The position of private ULN in the third quarter of 2022 was recorded at US$204.1 billion, lower than the previous quarter's position of US$207.7 billion. Year-on-year, private ULN contracted by 2.6% (yoy), deeper than the contraction in the previous quarter, which was 0.1% (yoy).

This development was due to the contraction of ULN in financial corporations and nonfinancial corporations, by 4.5% (yoy) and 2.1% (yoy) respectively, partly due to net debt repayments.

By sector, the largest private ULN originated from the financial and insurance services sector; the mining and quarrying sector; the electricity, gas, steam/hot water, and air conditioning supply sector; and the manufacturing industry sector, with a share reaching 77.8% of the total private ULN. This ULN remains dominated by long-term ULN with a share reaching 75.7% of the total private ULN.

"Indonesia's ULN in the third quarter of 2022 remained controlled, reflected in the ratio of Indonesia's ULN to Gross Domestic Product (GDP), which remained at around 30.1%, down from the ratio in the previous quarter of 31.8%," said BI in its official release.

Furthermore, Indonesia's ULN structure remains healthy, indicated by Indonesia's ULN remaining dominated by long-term ULN, with a share reaching 87.4% of the total ULN. In order to maintain a healthy ULN structure, Bank Indonesia and the Government continue to strengthen coordination in monitoring ULN developments, supported by the application of prudent principles in its management.

The role of ULN will also continue to be optimized in supporting development financing and driving national economic recovery, while minimizing risks that could affect economic stability.