Jakarta. Indonesia's foreign debt (ULN) hit $407.1 billion (Rp 6,364 trillion) in the fourth quarter of 2023, marking a 2.7 percent increase compared to the same period last year.

According to Bank Indonesia (BI), the increase is attributed to public sector transactions funded by foreign debt. Additionally, the increase in foreign debt position was impacted by the depreciation of the greenback against the majority of global currencies, including the rupiah.

Erwin Haryono, the Head of the Communication Department at the central bank, announced on Thursday that the government's foreign debt position at the end of the fourth quarter of 2023 stood at $196.6 billion, reflecting a 5.4 percent year-on-year (YoY) increase. This marks an acceleration from the 3.3 percent YoY growth witnessed in the previous quarter.

The increase in government foreign debt is also influenced by an increase in portfolio investment placements in domestic and international government securities markets, following positive market sentiment and the easing of global financial market uncertainties.

Most of the foreign debt is directed towards supporting government efforts in financing productive sectors and priority expenditures.

This financing support includes, among others, the health and social services sector (23.7 percent of total government foreign debt), government administration, defense, and mandatory social security (18.9 percent), education services (16.6 percent), construction (14.1 percent), and financial and insurance services (9.7 percent).

"The government's foreign debt position is relatively safe and controlled, as almost all of it has a long-term tenure, accounting for 99.8 percent of the total," Erwin added.

Meanwhile, private foreign debt remains under control and continues its contraction in growth. Private foreign debt at the end of Q4-2023 recorded $197.0 billion, experiencing a contraction of 1.9 percent YoY, continuing the contraction seen in Q2-2023 by 3.5 percent YoY.

The contraction comes from financial corporations and non-financial corporations, each experiencing a contraction of 2.4 percent YoY and 1.8 percent YoY, respectively.

In terms of economic sectors, the primary contributors to private foreign debt are the processing industry, financial and insurance services, the supply of electricity, gas, steam/hot water, and air conditioning, as well as mining and quarrying, collectively constituting 78.7 percent of the total private foreign debt. Additionally, private foreign debt is predominantly composed of long-term debt, making up 74.9 percent of the total private foreign debt.

Indonesia's foreign debt structure remains healthy, supported by the application of prudential principles in its management. This is reflected in Indonesia's foreign debt ratio to gross domestic product (GDP) at 29.7 percent, and it is dominated by long-term foreign debt, accounting for 86.6 percent of total foreign debt.

To maintain a healthy structure, the central bank and the government continue to strengthen coordination in monitoring foreign debt developments, supported by the application of prudential principles in its management.

"The role of foreign debt will continue to be optimized in supporting development financing and driving sustainable national economic growth while minimizing risks that can affect economic stability," he concluded.