Jakarta. Indonesia’s external debt rose to $434 billion in the first quarter of 2026, increasing 0.5% from the previous quarter and 0.8% year-on-year. Economists warned that the rising debt trend is narrowing the government’s fiscal space, especially as the rupiah continues to weaken to record lows in recent weeks.

Indonesia’s external debt-to-gross domestic product ratio stood at 29.5% in the first quarter, slightly lower than the 30% recorded in the fourth quarter of 2025.

Syafruddin Karimi, an economist at Andalas University, said Indonesia is not currently facing a foreign debt crisis, but financing flexibility is becoming increasingly constrained as the government still requires large amounts of funding for priority spending programs.

“In general, Indonesia’s external debt does not appear to be heading toward an aggressive surge, but the risks are shifting from the total nominal amount toward periodic financing needs, the rupiah exchange rate, and Indonesia’s ability to attract foreign currency inflows,” Syafruddin said.

He noted that the decline in the debt-to-GDP ratio was mainly driven by faster economic growth rather than a reduction in new borrowing.

While stronger economic growth improves the country’s capacity to absorb debt obligations, external debt repayments still require foreign currency rather than rupiah-denominated GDP growth alone, he said.

According to Syafruddin, the debt ratio should therefore be assessed alongside export performance, foreign exchange reserves, capital inflows, debt maturity schedules, and rupiah stability.

“If the rupiah weakens sharply, the value of external debt obligations will rise even if the debt-to-GDP ratio appears manageable. Our financial health still depends on Indonesia’s ability to generate foreign exchange earnings and maintain rupiah stability,” he said.

He warned that fiscal space and foreign exchange reserves could quickly come under pressure if the rupiah continues weakening, energy prices remain elevated, subsidy burdens increase, and foreign investors pull funds from Indonesia’s bond market.

For that reason, he said the government needs to maintain fiscal discipline and spending quality, while Bank Indonesia must continue safeguarding rupiah stability and inflation expectations.

Long-Term Debt
Separately, Bank Indonesia spokesperson Ramdan Denny Prakoso said Indonesia’s external debt structure remains healthy because of prudent debt management practices.

Long-term debt accounts for 85.4% of Indonesia’s total external debt, he said.

“The role of external debt will continue to be optimized to support development financing and encourage sustainable national economic growth,” Ramdan said.

Government external debt reached $214.7 billion in the first quarter of 2026, growing 3.8% year-on-year, while private-sector external debt stood at $191.4 billion, down 1.8% year-on-year.

Yusuf Rendy Manilet, a researcher at Center of Reform on Economics, said external debt growth remains manageable as long as economic growth and state revenues expand faster than debt servicing and interest costs.

“However, if growth slows while interest expenses rise due to higher global interest rates and rupiah depreciation, fiscal space will become increasingly narrow and productive spending could come under pressure,” Yusuf said.

“The challenge is ensuring that additional debt is truly used for productive activities that create new economic growth, rather than merely covering short-term financing needs,” he added.