Foreign Debt Falls in Q3/ 2022

Antara News and its subsidiaries are reporting that Bank Indonesia (BI) have stated that Indonesia’s External Debt (ULN) in Q3/ 2022 dropped again to USD 394.6-billion, from the position in Q2/ 2022 of USD 403.6-billion.

In an official statement in Jakarta, Tuesday, the Executive Director of the BI Communications Department Erwin Haryono revealed that this development was caused by the decline in external debt from the public sector (government and central bank) and the private sector, say Antara News.

On an annual basis, the position of external debt in Q3/ 2022 experienced a contraction of 7-percent Year-on-Year (YoY) deeper than the contraction in the previous quarter of 2.9-percent (YoY.)

Meanwhile, the position of government external debt in Q3/ 2022 was USD 182.3-billion, lower than the position of external debt in the previous quarter which was USD 187.3-billion. On an annual basis, government external debt contracted 11.3-percent (YoY), deeper than the contraction in the previous quarter of 8.6-percent (YoY.)

The decline in the government’s external debt position was caused by the shift of investment in domestic Government Securities (SBN) to other instruments, thereby reducing the share of non-resident investors’ ownership in domestic SBN in line with increasing uncertainty in global financial markets, say Antara News.

He explained that the repayment of several maturing program and project loans also contributed to the decline in government external debt in the reporting period.

Meanwhile, the withdrawal of external debt in Q3/ 2022 is still prioritized to support government priority spending, including efforts to deal with COVID-19 and the National Economic Recovery (PEN) program.

The government is committed to maintaining credibility by fulfilling the obligation to pay principal and interest on debt in a timely manner, as well as managing external debt in a prudent, credible and accountable manner. Government external debt support in meeting priority expenditure needs includes the health services sector and social activities (24.6-percent of total government external debt.)

Then for the education services sector (16.6-percent), the government administration sector, defence, and compulsory social security (15.2-percent), the construction sector (14.2-percent), and the financial and insurance services sector (11.6-percent). The position of government external debt is relatively safe and controlled considering that almost all external debt has a long-term tenor with a share of 99.9-percent of total government external debt.

On the other hand, Erwin said that the position of private external debt in Q3/ 2022 was recorded at USD 204.1-billion, lower than the position in the previous quarter of USD 207.7-billion. On an annual basis, private external debt contracted 2.6-percent (YoY), deeper than the contraction in the previous quarter of 0.1-percent (YoY.)

This development was caused by the contraction of external debt of financial institutions and non-financial companies by 4.5-percent (YoY) and 2.1-percent (YoY), partly due to net payments of debt securities.

By sector, the largest private external debt comes from the financial and insurance services sector, the mining and quarrying sector, the electricity, gas, steam/hot water and cold air supply sector, and the manufacturing industry sector with a share of 77.8-percent of the total private external debt. This external debt remains dominated by long-term external debt with a share of 75.7-percent of total private external debt.

He revealed that the structure of Indonesia’s external debt remained healthy, supported by the application of the precautionary principle in its management. Indonesia’s external debt remained under control in the third quarter of this year, reflected in the ratio of Indonesia’s external debt to Gross Domestic Product (GDP) which was maintained at around 30.1-percent, down from the ratio in the previous quarter of 31.8-percent, report Antara News.

Indonesia’s external debt structure also remains healthy, as demonstrated by Indonesia’s external debt which is still dominated by long-term external debt with a share of 87.4-percent of total external debt. In order to keep the external debt structure healthy, BI and the government continue to strengthen coordination in monitoring the development of external debt, supported by the application of the precautionary principle in its management.

The role of external debt will also continue to be optimized in supporting development financing and encouraging national economic recovery, by minimizing risks that could affect economic stability.

Source: Antara News Sumbar

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