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Foreign Debt in Indonesia rose up in August

Indonesia’s foreign debt rose by the end of August as the government borrowed funds from multilateral organizations to cover the country’s fiscal deficit, while businesses borrowed funds for investment, Bank Indonesia (BI) announced last Thursday.

Indonesia’s external debt, which includes government and private-sector borrowings, was recorded at US$413.4 billion in August, up 5.7 percent year-on-year (YoY), central bank data showed.

What drive the rise in foreign debt?

The government’s foreign debt rose 3.4 percent YoY to $200.1 billion in August, according to the central bank. Meanwhile, overall public-sector debt, which aside from that of the government also includes that of the central bank, amounted to $203 billion.

The rise in the government’s foreign debt was “driven by the partial withdrawal of loan commitment from multilateral organizations to support Indonesia’s COVID-19 pandemic handling and the national economic recovery program,” BI said in a statement.

The government has earmarked Rp 695.2 trillion ($47.25 billion) to finance pandemic handling and support the economy, which is expected to widen the budget deficit to 6.34 percent of GDP. Several multilateral organizations, such as the World Bank, the Asian Development Bank, and the Asian Infrastructure Investment Bank, have committed to providing loans for the country.

Meanwhile, private-sector foreign debt, which includes borrowings by state-owned enterprises, grew at a faster rate than government debt at 7.9 percent in September to $210.4 billion.

“Most of the external debt was used to finance corporate investment activities,” the central bank said, adding that 77.5 percent of the debt came from four sectors, namely mining, manufacturing, financial services, and insurance, as well as electricity and gas procurement.

The central bank deemed the overall external debt level to be healthy, with the foreign-debt-to-GDP ratio recorded at 38.5 percent at the end of September, up from 38.2 percent in the previous month. Long-term loans account for 89 percent of the current outstanding debt.

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