Adrian Wail Akhlas, Jakarta – Foreign debt has risen in the third quarter of the year, due to the government's samurai bond issuances and borrowed funds from multilateral organizations to finance coronavirus relief packages and economic stimulus toward recovery, according to Bank Indonesia (BI) data on Monday.
Indonesia's external debt, which includes government and private-sector borrowings, reached US$408.5 billion by the end of the third quarter, up 3.8 percent year-on-year (yoy) but down from $413.4 billion in August, as the private sector paid their debts.
The government's foreign debt increased 1.6 percent yoy to $197.4 billion in September, according to the central bank. Meanwhile, overall public debt amounted to $200.2 billion, including the central bank's debts.
"The growth in foreign debt slowed, as foreign investors adjusted their portfolios in Indonesia's debt market because of high uncertainty in global financial markets," BI said in a statement. "However, the government's samurai bond issuance in the Japanese financial market and borrowings from multilateral organizations in the third quarter moderated the slowing trend."
Indonesia raised 100 billion yen (US$957 million) from the issuance of five-tranche samurai bonds in early July to help the government plug the fiscal deficit and fund its COVID-19 response.
The government has earmarked Rp 695.2 trillion ($49.3 billion) to finance its coronavirus response and economic stimulus package, which is expected to widen the budget deficit to 6.34 percent of gross domestic product (GDP).
Several multilateral organizations, such as the World Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank, have committed to providing billions of dollars in loans to the country.
Also in the third quarter, Indonesia fell into its first recession since the 1998 Asian financial crisis as the government struggled to contain COVID-19 and the attendant economic fallout. The economy contracted 3.49 percent in the third quarter, following a 5.32 percent contraction in the second quarter.
BI data shows that private sector foreign debt, which includes borrowings by state-owned enterprises, grew 6 percent to $208.4 billion in September, a faster pace than government debt growth. It said 77.4 percent of the debt came from four sectors, namely mining, manufacturing, financial services and insurance, as well as electricity and natural gas procurement.
The central bank still deemed that total external debt was at a healthy level with debt-to-GDP ratio at 38.1 percent as of September, up from the 37.4 percent ratio recorded at the end of the second quarter. Long-term loans accounted for 89.1 percent of the current outstanding debt.
"The role of external debt will be optimized to support development financing and stimulate economic recovery by minimizing the risks that may affect macroeconomic stability," the bank added.