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Indonesian foreign debt up 7.5 percent in January on high government borrowing

Jakarta Post - March 16, 2020

Adrian Wail Akhlas, Jakarta – Indonesia's foreign debt rose in January due to an increase in the government's net borrowing, mainly through the issuance of government debt papers (SBNs).

According to data released by Bank Indonesia on Monday, the country's foreign debt, which includes borrowing by both the government and the private sector, was up 7.5 percent year-on-year (yoy) at US$410.8 billion in January, but that marks a slight slowdown in the annual growth rate from 7.7 percent recorded in December.

The government's foreign debt, which include those raised by the central bank, rose 9.5 percent yoy in January to $207.8 billion, driven by the issuance of SBN including dollar-denominated bonds worth $2 billion and another Euro 1 billion ($1.11 billion) of debt papers issued in Europe to finance the budget deficit in 2020.

Despite the latest increase in external debt, the central bank deems the overall level healthy as the foreign-debt-to-gross-domestic-product (GDP) ratio was recorded at 36 percent, down from the previous month. Long-term loans account for about 89 percent of the current outstanding debt."Bank Indonesia, in close coordination with the government, continues to monitor the external debts by promoting the prudential principle implementation in its management to maintain a solid external debt structure," the central bank wrote in a statement.

"Furthermore, the external debts' role will be optimized to finance development while minimizing risks that can affect economic stability."

Finance Minister Sri Mulyani Indrawati said previously that Indonesia's budget deficit may widen from 2.2 of GDP to 2.5 percent in 2020. The new forecast takes into account the impact of the outbreak and a slump in oil prices driven by Saudi Arabia's decision to launch a price war against Russia.

BI explained on Monday that the government debt was largely used to fund healthcare and social services, which accounted for 23.5 percent of total government debt, as well as for the education (16.3 percent) and construction sector (16.2 percent), among other sectors.

Private-sector debt, which also include loans to state-owned enterprises (SOEs), expanded 5.8 percent yoy to $203.04 in January, slowing down from 6.5 percent growth booked in December amid slowing growth in financial services.

Private-sector debt was largely disbursed to four sectors, namely financial services and insurance, electricity, gas and steam procurement, mining as well as manufacturing. Those sectors accounted for 77.3 percent of the private-sector external debt.

Source: https://www.thejakartapost.com/news/2020/03/16/indonesian-foreign-debt-up-7-5-percent-in-january-on-high-government-borrowing.html