Indonesia external debt recorded a notable decline in the third quarter of 2025, signaling a shift toward more cautious borrowing across both the public and private sectors. According to the latest national debt data, Indonesia’s total external debt position reached 424.4 billion dollars in Q3 2025, down from 432.3 billion dollars in the previous quarter. This quarterly reduction reflects the country's ongoing efforts to maintain debt sustainability amid global financial uncertainty.

On an annual basis, Indonesia external debt contracted by 0.6 percent, marking a sharp reversal from 6.4 percent year-on-year growth in Q2 2025. This contraction was driven primarily by the slowdown in government borrowing and deeper declines in private sector external liabilities. As global markets continue to face volatility, Indonesia appears to be shifting toward a more conservative external financing strategy to safeguard long-term economic resilience.

Public Sector External Debt Slows as Government Reduces Borrowing Pace

Government external debt remains the largest component of Indonesia external debt, but its growth has slowed significantly. In Q3 2025, government external debt reached 210.1 billion dollars, growing only 2.9 percent year-on-year compared with a much stronger 10 percent annual growth in Q2 2025. This steep deceleration reflects the weakening of foreign capital inflows into government securities.

The slowdown was particularly influenced by declining demand for domestic government bonds (SBN) from foreign investors. High global financial uncertainty, elevated interest rates in advanced economies, and tightening dollar liquidity reduced the attractiveness of emerging-market assets, including Indonesian bonds. As a result, the government relied less on external borrowing during the quarter.

Despite the moderation in borrowing, the government continues to use external debt strategically to support priority development programs. Debt financing is still directed toward strengthening long-term economic capacity, funding social programs, and supporting essential public services. These include healthcare services, education, infrastructure, transportation, construction, and social protection initiatives.

A detailed breakdown of government debt allocation shows clear development-oriented priorities:

Importantly, the structure of public sector debt remains overwhelmingly long-term, with 99.9 percent classified as long-term liabilities. This composition reduces refinancing pressure and protects the country from short-term market volatility, contributing to the stability of overall Indonesia external debt.

Private Sector External Debt Continues to Decline in 2025

The private sector experienced a continued decline in external borrowing, reinforcing the downward trend in total Indonesia external debt. Private external debt reached 191.3 billion dollars in Q3 2025, down from 193.9 billion dollars in Q2 2025. On an annual basis, private external debt contracted by 1.9 percent, deeper than the 0.2 percent contraction recorded in the previous quarter.

This decline was driven by shrinking external borrowing across both financial corporations and non-financial corporations:

• Financial corporations: contracted by 3 percent
• Non-financial corporations: contracted by 1.7 percent

The contraction suggests that private firms are becoming increasingly selective in foreign debt exposure. Several factors may have contributed, including:

• Higher global financing costs
• Exchange rate volatility
• A preference for domestic financing alternatives
• Corporate deleveraging strategies amid global economic uncertainty

Private external debt remains concentrated in four major economic sectors:

1. Manufacturing Industry
2. Financial and Insurance Services
3. Electricity and Gas Supply
4. Mining and Quarrying

Together, these sectors account for approximately 81 percent of total private sector external debt. The concentration is typical for emerging economies with large industrial and resource-based sectors, but the downward trend indicates that key industries may be reducing leverage in anticipation of weaker global demand and shifting market risks.

Indonesia’s External Debt Structure Remains Strong and Sustainable

Despite fluctuations in quarterly borrowing, the overall structure of Indonesia external debt remains robust. Indonesia continues to maintain a healthy external debt profile supported by long-term maturities and a favorable debt-to-GDP ratio.

In Q3 2025, Indonesia’s external debt-to-GDP ratio fell to 29.5 percent, improving from 30.4 percent in Q2 2025. This downward shift strengthens Indonesia’s position relative to global benchmarks and reinforces its ability to meet external obligations without straining the broader economy.

Long-term debt remains a cornerstone of Indonesia’s external debt structure: 86.1 percent of total external debt is long-term

This composition ensures stability by reducing rollover risk, limiting vulnerability to sudden capital outflows, and providing the government and private sector with a longer time horizon to manage repayment obligations.

Strong coordination between Bank Indonesia and the Indonesian government continues to support debt sustainability. Both institutions actively monitor external debt developments, identify potential risks, and implement policies to maintain a healthy balance between borrowing needs and economic stability.

Going forward, external debt will continue to play an important role in financing Indonesia’s long-term development agenda. When managed prudently, external borrowing can expand fiscal capacity, improve public infrastructure, and stimulate economic growth. However, maintaining caution is essential to ensure that borrowing does not increase vulnerability to global financial shocks.

The Q3 2025 data shows that Indonesia external debt is trending downward, with both government and private sector liabilities easing in response to global financial uncertainty. The contraction of 0.6 percent year-on-year, the decline in private borrowing, and the slower pace of public sector debt growth all indicate a shift toward more sustainable financing strategies.

With a stronger long-term debt structure, an improving debt-to-GDP ratio, and continued policy coordination, Indonesia is well-positioned to manage external risks while ensuring that debt remains a productive tool for national development.

Reference:

Bank Indonesia Report - External Debt Statistics Of Indonesia - November 2025