Concern about Indonesia’s financial stability has heightened as the country’s foreign debt (USD $304.3 billion), by far, exceeds the central bank’s foreign exchange reserves which stood at USD $105.3 billion in late August 2015. Meanwhile, the weak rupiah (having depreciated nearly 15 percent against the US dollar so far in 2015) adds significant pressure on Indonesia’s foreign debt position hence causing concern about a looming debt crisis.
On Tuesday (08/09) the Indonesian rupiah continued to weaken. By 12:30 pm local Jakarta time, the currency had depreciated 0.58 percent to IDR 14,349 per US dollar, a level not seen since the Asian Financial Crisis in the late 1990s. Meanwhile, Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.36 percent to IDR 14,285 per US dollar on Tuesday (08/09).
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Since 2012 Indonesia’s private foreign debt has exceeded public sector debt. This is a concern as roughly 25 percent of this private foreign debt constitutes short-term debt and therefore these indebted corporations can suffer from severe liquidity problems. To make matters worse, most Indonesian companies have been plagued by slowing profit growth. In this context credit rating agencies may soon cut the ratings of companies. Standard & Poor’s already downgraded seven Indonesian companies so far in 2015 (including Japfa Comfeed Indonesia, Gajah Tunggal and MNC Investama) due to foreign currency exposure.
Similar to most other (emerging market) currencies, the Indonesian rupiah has been weakening since mid-2013 amid (looming) US monetary tightening and China’s recent decision to devalue its yuan (triggering concern about a currency war in emerging Asia to maintain competitive exports).
Indonesia's Foreign Debt - 2015:
|2015|| Public Debt
||Private Debt||Total Debt|
|January||$135.7 billion||$162.9 billion||$298.6 billion|
|February||$134.8 billion||$164.1 billion||$298.9 billion|
|March||$132.8 billion||$165.3 billion||$298.1 billion|
|April||$132.9 billion||$167.2 billion||$300.1 billion|
|May||$133.5 billion||$168.7 billion||$302.3 billion|
|June||$134.6 billion||$169.7 billion||$304.3 billion|
Indonesia's Foreign Debt - 2014:
|2014|| Public Debt
||Private Debt||Total Debt|
|January||$127.9 billion||$141.4 billion||$269.3 billion|
|February||$129.0 billion||$143.1 billion||$272.1 billion|
|March||$130.5 billion||$146.0 billion||$276.5 billion|
|April||$131.0 billion||$145.6 billion||$276.6 billion|
|May||$132.2 billion||$151.5 billion||$283.7 billion|
|June||$131.7 billion||$153.2 billion||$284.9 billion|
|July||$134.2 billion||$156.4 billion||$290.6 billion|
|August||$134.2 billion||$156.2 billion||$290.4 billion|
|September||$132.9 billion||$159.3 billion||$292.3 billion|
|October||$133.2 billion||$161.3 billion||$294.5 billion|
|November||$133.9 billion||$160.5 billion||$294.4 billion|
|December||$129.7 billion||$162.8 billion||$292.6 billion|
Source: Bank Indonesia
Foreign Exchange Reserves Indonesia (in USD million):