Xavier Jean, credit analyst at Standard & Poor's, wrote in a statement (published on Thursday) that these Indonesian companies are “fighting the indirect effects of rupiah depreciation on their margins, balance sheet and liquidity - and that is a fight over which they have no control. While we do not expect a wave of corporate defaults in Indonesia, liquidity pressure and refinancing risks would undeniably build up for those companies that have unhedged foreign currency exposure in case the rupiah hits IDR 15,000 per US dollar and stays there." If the rupiah would stay at that level for at least three months, then Jean expects to see companies start to default on their unhedged debt.

Amid looming further monetary tightening in the USA and recent turmoil in China (the devaluation of the yuan), Indonesia’s rupiah has depreciated 15.1 percent so far in 2015 to IDR 14,322 per US dollar (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR). Meanwhile, Indonesia’s weak export performance, caused by sluggish global demand, has curbed the nation’s foreign exchange revenue.

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

When the rupiah was strong (in the years 2010-2013), these Indonesian companies took on considerable foreign debt at attractive interest rates. However, a significant portion of this foreign debt was (and still is) unhedged and thus vulnerable to currency shocks. Indonesia’s central bank (Bank Indonesia) only started to require private companies to hedge foreign debt from October 2014, leaving nearly 50 percent of Indonesia’s private sector foreign debt unhedged. Jean stated that in the years 2016-2018 a large chunk of this debt will mature. Rupiah depreciation would add to the debt burden of these companies and make it more difficult to refinance their debt position.

S&P said that the Indonesian companies that are most at risk are those companies engaged in the consumer goods, manufacturing, agribusiness, media, and retailing sectors.

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

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