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Jakarta Post

Indonesia’s foreign debt growth decelerates in February on capital outflow

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Wed, April 15, 2020   /   04:35 pm
Indonesia’s foreign debt growth decelerates in February on capital outflow The country’s external debt, which includes borrowing by both the government and public sector, was recorded at US$407.5 billion, growing by 5.4 percent year-on-year (yoy) in February. (Shutterstock/File)

Indonesia’s foreign debt grew slower in February as foreign investors reduced holdings of Indonesian assets amid a risk-off environment driven by the COVID-19 pandemic, Bank Indonesia (BI) announced.

The country’s external debt, which includes borrowing by both the government and the public sector, was recorded at US$407.5 billion, growing by 5.4 percent year-on-year (yoy) in February. That represents a slowdown in the annual growth rate from 7.6 percent in January.

Public sector foreign debt grew at a slower rate at 5.1 percent to $203.3 billion, lower than 9.5 percent in January. Around Rp 171 trillion in capital flew out of Indonesian financial assets in the first quarter of this year and into safe assets such as gold and US dollars. Meanwhile, private sector external debt growth remained stable at 5.9 percent yoy in February to $204.2 billion.

“The adverse impact of the COVID-19 outbreak has influenced global sentiment, triggering capital outflow from the domestic government securities (SBN) market and causing a decline in the government’s external debt,” BI wrote in a statement.

Read also: Explainer: Indonesia to finance coronavirus battle mostly through debt

“The management of government external debt is conducted in a prudent and credible manner to support government spending on priority sectors to promote economic growth and improve public welfare.” Priority sectors include health and social spending, education, construction, finance and insurance, public administration and defense.

Private sector external debt was largely disbursed to four sectors, namely financial services and insurance, electricity, gas and steam procurement, mining as well as manufacturing. The sectors accounted for 77.4 percent of the private-sector external debt.

The central bank deems the overall external debt level healthy as the foreign-debt-to-gross-domestic-product (GDP) ratio was recorded at 35.9 percent, down from the previous month of 36.3 percent. Long-term loans account for 89.2 percent of the current outstanding debt.