Private Sector Foreign Debt in Indonesia Doubled between 2009 and 2013
Indonesia's central bank (Bank Indonesia) said that the country's private debt has increased steadily in recent years. On the one hand this is a good sign as it indicates that the private sector is growing, but on the other hand the lender of last resort warned Indonesian companies to watch over their foreign loans as it can jeopardize the country’s financial stability. Private sector foreign debt doubled between 2009 and 2013, reaching USD $141.4 billion in January 2014. Meanwhile, public debt stood at the level of USD $127.9 billion in the same month.
Senior Deputy Governor of Bank Indonesia Mirza Adityaswara said that many Indonesian companies have been using foreign sources (whether bond sales or bank loans) for business expansion as foreign confidence in Indonesia's economic fundamentals has grown. Two of these examples are Lippo Karawaci, Indonesia's largest listed property company, which raised USD $150 million through a bond issuance this year and Tower Bersama Infrastructure, which announced to sell USD $500 million worth of bonds in 2015.
| January 2014 | YoY Growth | |
| Public Foreign Debt | USD $127.9 billion | +1.9% |
| Private Foreign Debt | USD $141.4 billion | +12% |
| Total Foreign Debt | USD $269.3 billion | +7.1% |
Sources: Bank Indonesia
However, as the US dollar may appreciate further this year (amid continued US tapering and possible interest rate hikes in 2015), it implies higher interest rate payments for Indonesian companies. Furthermore, as the impact of changes in Federal Reserve monetary policy on emerging markets remains unknown, Adityaswara prefers a prudent domestic fiscal framework.
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