Economist predicts external debt ratio to remain relatively stable in second half

Jakarta (ANTARA) - PermataBank Chief Economist Josua Pardede estimates that Indonesia’s external debt (ULN) ratio to gross domestic product (GDP) will remain relatively stable in the second half of 2026, at around 30–31 per cent of GDP, with an end-of-year projection of roughly 30.5–31.0 per cent.

“This position is still considered under control, because external debt in the second quarter, at US$453.4 billion, did grow 4.4 per cent year on year, but its overall structure remains dominated by long-term debt at 82.1 per cent. Private external debt actually contracted by 0.6 per cent, and 75.7 per cent of private external debt is long term,” Josua said when contacted by ANTARA in Jakarta on Tuesday.

He added that the IMF also considers a ratio of around 30 per cent to be moderate, and Indonesia’s refinancing risk relatively limited, although dependence on foreign portfolio investment remains a point of vulnerability.

According to him, pressure for a higher ratio in the second half could come from greater state budget (APBN) financing needs and rising foreign ownership of domestic securities. However, this is likely to be offset by nominal economic growth and private external debt that has not shown aggressive expansion.

“The government’s financing strategy also continues to prioritise domestic sources and the rupiah, so foreign exchange risk does not increase in proportion to gross financing needs,” he said.

In terms of structure, Josua estimates that the short-term external debt ratio, based on remaining maturity against foreign exchange reserves in July 2026, will remain at around 71–74 per cent, with a midpoint of roughly 72–73 per cent, while for the second half the baseline scenario range is 68–75 per cent.

He explained that the development of the short-term external debt ratio to foreign reserves does need to be watched, but it has not yet shown a critical level of external vulnerability.

The short-term external debt ratio based on remaining maturity against foreign reserves was relatively controlled throughout 2025 before jumping in the second quarter of 2026 — from 55.57 per cent in Q2 2025, down to 52.96 per cent in Q3 and 49.99 per cent in Q4, then rising to 55.82 per cent in Q1 2026 and surging to 72.77 per cent in Q2.

Meanwhile, the external debt ratio to GDP changed only slightly, from 30.51 per cent to 30.63 per cent. This means, according to Josua, that what needs attention now is primarily not the size of the overall external debt stock, but changes in its maturity structure and foreign exchange needs over the next 12 months.

Remaining maturity measures all obligations falling due within a maximum of one year, including debt that was originally long term but is now approaching maturity, he added.

Upon closer examination, the surge largely stems from an increase in short-term liabilities of the public sector, particularly Bank Indonesia (BI), not from a spike in private debt.

Total external debt maturing within one year rose from around US$84.8 billion in June 2025 to US$105.9 billion in June 2026.

Over the same period, government and central bank obligations rose from around US$34.5 billion to US$51.6 billion, whilst private obligations rose more modestly from around US$50.3 billion to US$54.4 billion.

Within the central bank component, the increase was around US$14.3 billion, contributing roughly two-thirds of the rise in short-term external debt based on remaining maturity.

“This is consistent with Bank Indonesia’s explanation that the increase in central bank external debt mainly comes from rising foreign investor ownership of SRBI securities. This is an important nuance, because SRBI are rupiah-denominated securities held by foreign investors,” Josua said.

Consequently, he continued, the risk is more about the possibility of rapid portfolio outflows and conversion of rupiah into foreign currency, rather than purely dollar-denominated principal payment obligations. Thus, the figure of 72.77 per cent in Q2 2026 should not be interpreted as if it were entirely dollar debt that must be repaid using foreign reserves.

Josua also cautioned that policy attention should not be limited to maintaining the external debt-to-GDP ratio, but should also focus on safeguarding foreign currency liquidity ahead of maturity dates.

Bank Indonesia needs to use periods of capital inflows to rebuild foreign reserves, whilst intervention should be directed at moderating excessive rupiah movements rather than defending a specific exchange rate level.

On the other hand, the government needs to maintain a long maturity profile and limit the bunching of payments in certain periods, he said.

Meanwhile, on the private side, he said hedging discipline and liquidity adequacy are becoming increasingly important, given that Bank Indonesia’s prudential framework does require minimum hedging ratios and minimum liquidity ratios for companies holding foreign currency debt.