Foreign Debt Accelerates in January as Private Sector Seeks More Loans
Jakarta. Indonesia's foreign debt accelerated in January on the back of growing demand from the private sector to finance their expansion, data from Bank Indonesia showed on Monday.
The foreign debt rose to $269.3 billion, or 7.1 percent year-on-year. That was faster than the 4.6 percent pace recorded in December. Private sector debt to foreigners rose 12 percent to $141 million while public sector debt increased 1.9 percent to $127.9 million.
"The foreign debt growth in January is in line with the need to finance the economy," the central bank said in a statement.
Indonesia's current account — which is the widest record for goods and services trade — has been in deficit in the last three years, pushing firms to be more reliant on external financing for their expansion.
Financial firms accounted 26.5 percent of the debt among the private sector, followed by manufacturing (20.4 percent), mining (18.1 percent), utilities (11.6 percent), and communication (7.6 percent).
About 83 percent of the total foreign debt would be repayable in more than 12 months time, easing central bank concerns on foreign exchange pressure from debt servicing in 2014. "Bank Indonesia sees that the foreign debt position is still sound in supporting the country's external resilience," the central bank said.
The rupiah rose to a six-month high on Monday as offshore investors continued to place their funds into the country's assets including rupiah and bonds.
Fund managers and economists said that the nomination of Jakarta Governor Joko Widodo as the presidential candidate for the Indonesian Democratic Party of Struggle (PDI-P) boosted positive sentiment.
The rupiah, which fell 26 percent last year, has risen 7.5 percent this year to trade at 11,272 against the greenback on Monday.
"Joko's nomination for the PDI-P is likely to reduce the risk of political uncertainty," said Aldian Taloputra, an economist at Mandiri Sekuritas.
David Sumual, chief economist at Bank Central Asia, said the rupiah's gains this year were based solely on political sentiment.
"[Such volatility] eventually makes us become more risky for foreign investors. Our macro-economic data has not really changed," he said.
Benjamin Haratua Siahaan, an investment manager at Panin Asset Management, said that rupiah appreciation would improve investors' appetite for Indonesian bonds. "We may see more foreign investors do the buying," Benjamin said.
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