Indonesia's External Debt Ratio Improves in June 2021

Indonesia's external debt (ULN) ratio improved in Q2 2021, both relative to Gross Domestic Product (GDP) and export performance. This was due to domestic economic growth and a slowdown in ULN.

Bank Indonesia (BI)'s External Debt Statistics show that Indonesia's ULN in Q2 2021 reached US$ 415.08 billion, equivalent to Rp 6,017.24 trillion (using an exchange rate of Rp 14,496 per US dollar). This is equivalent to 37.46% of GDP.

Indonesia's ULN ratio decreased by 156 basis points (bps) to 37.46% in Q2 2021, compared to 39.04% in Q1 2021. The ULN ratio also slowed by 185 bps from its highest level of 39.41% reached in Q4 2020.

Compared to export performance, Indonesia's ULN ratio in the second quarter of this year also fell by 19,730 bps to 189.18% of exports from 208.91% in the first quarter of this year. The ULN ratio also slowed by 25,360 bps compared to 214.91% in the fourth quarter of last year.

In assessing the ULN condition, it is not only necessary to look at the nominal value but also the ratio. One example is the debt-to-GDP ratio, which measures a country's economic ability to repay its debt. Quoting Tradingeconomic, Indonesia's ULN-to-GDP ratio is significantly lower than Japan's 266% of GDP, Italy's 156% of GDP, and Singapore's 131% of GDP at the end of 2020.

Like a company, the larger the company, the greater the need to meet its funding requirements. If a company's debt is very large, it does not necessarily mean the company is unhealthy. However, its ability to repay the debt must also be considered. As long as the debt is used for its intended purpose and with caution.