However, financial institutions (for example banks) and mining companies (including oil & gas companies) are to be excluded from this tighter borrowing regulation as Indonesia’s financial sector has a separate regulatory framework regarding debt and equity, while in the mining sector companies have to engage in - and comply with - government contracts.

Currently, the Indonesian government considers any interest payment made by a company as tax deductible.

The relatively high amount of foreign debt in Indonesia is a concern, particularly as the rupiah has been depreciating drastically over the past two years. According to the latest data from Bank Indonesia, the country’s foreign debt stood at USD $304.3 billion at the end of the second quarter of 2015, comprising of USD $169.7 billion private sector external debt.

Bahas