Indonesia's Private External Debt Shows Significant Decline

Overview of ULN Trends

Indonesia's private external debt has shown a consistent decline in recent months, reaching US$190.7 billion in October 2025, representing a 1.9% year-on-year decrease ¹

Economic Perspectives on the Decline

Economists are divided in their interpretation of this trend. David Sumual, Chief Economist at PT Bank Central Asia Tbk. (BBCA), suggests that the decline is closely linked to the slumping global commodity prices. Corporations, particularly those in the commodity sector, are adopting a wait-and-see approach, reducing their external borrowing as they await more favorable market conditions ¹

Alternative Financing Strategies

Josua Pardede, Chief Economist at PT Bank Permata Tbk. (BNLI), offers a broader perspective, suggesting that the contraction in private external debt doesn't necessarily indicate a complete halt in business expansion. Instead, companies might be rationalizing their costs by avoiding foreign exchange risks and high interest rates associated with foreign currency loans. This could involve shifting to rupiah-denominated loans or using improved internal cash reserves to repay existing debts ¹

Implications for Investment and Growth

The decline in private external debt raises important questions about its potential impact on future investment growth. If commodity prices remain depressed, the cautious approach adopted by corporations could have systemic implications for investment activities in the coming months. Monitoring other economic indicators such as capital goods imports and investment loan demand will be crucial in determining whether businesses are merely diversifying their funding sources or significantly curtailing their operations ¹