The central bank of Indonesia stated that Indonesia's foreign debt grew 6.3 percent (y/y) to USD $319.0 billion in April 2016. Foreign debt of Southeast Asia's largest economy in April consists of private sector external debt (USD $165.2 billion) and public sector external debt (USD $153.8 billion). Indonesia's private sector foreign debt continued to ease as local companies have been more careful in taking up new foreign debt due to the weakening rupiah in 2013-2015. In April, private sector external debt fell 1.1 percent (y/y).
Public sector foreign debt, on the other hand, rose sharply as the government needs more funds for its ambitious development programs and to settle its existing debt obligations. Bank Indonesia stated that Indonesia's public external debt surged 15.7 percent (y/y) in April 2016. However, Indonesia's public debt-to-GDP ratio is still safe at 27 percent (based on Law No. 17/2003 on State Finances the maximum mandated ratio is set at 60 percent). As such, Indonesia's public debt position is in a much healthier state compared to other emerging markets in the ASEAN region or most advanced economies (for example the USA and Japan have ratios that exceed 100 percent).
Earlier, the National Economic and Industry Committee (KEIN) advised Indonesian President Joko Widodo three matters with regard to public foreign debt: (1) try to minimize the cost of high risk debt, (2) do not let creditors have an influence on Indonesia's political agenda, and, lastly, (3) seek foreign debt with soft requirements - for example long term debt with low interest rates - particularly through multilateral and bilateral loans.
Another sign that Indonesian companies and government have become more cautious in taking up new foreign debt is that long-term external debt grew 8.3 percent (y/y) to USD $279.3 billion in April 2016, while short-term foreign debt fell 5.5 percent (y/y) to USD $39.7 billion. Short-term debt implies more risks as sudden global shocks can give rise to a suddenly depreciating rupiah exchange rate. Global developments that could trigger a shock on global markets are the possible exit of the United Kingdom from the European Union (the so-called "Brexit") and another interest rate hike in the USA. Also another sudden slowdown in China could put pressure on the Indonesian rupiah.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
Regarding private sector foreign debt, Bank Indonesia stated that it is mainly concentrated - for 76 percent of the total - in the financial, manufacturing, mining, and electricity, gas & water supply sectors.
Overall, Bank Indonesia considers Indonesia's foreign debt situation safe. However, the lender of last resort emphasized that it will continue to carefully monitor further developments of the nation's foreign debt, especially developments regarding private sector external debt.
Indonesia's Foreign Debt - 2016:
|2016|| Public Debt
||Private Debt||Total Debt|
|January||$143.4 billion||$164.6 billion||$308.0 billion|
|February||$146.9 billion||$164.6 billion||$311.5 billion|
|March||$151.3 billion||$164.7 billion||$316.0 billion|
|April||$153.8 billion||$165.2 billion||$319.0 billion|
Indonesia's Foreign Debt:
|Type of Debt||2013|| 2014
|Public Debt||$123.5 billion||$129.7 billion||$143.0 billion|
|Private Debt||$140.5 billion||$162.8 billion||$167.7 billion|
|Total Debt||$264.1 billion||$292.6 billion||$310.7 billion|
Source: Bank Indonesia