Indonesia's success in reducing foreign debt by USD 8 billion in Q3 2025 is evidence of macroeconomic stability and the ability of the government and the business world to carry out appropriate and measurable risk management. In addition to being a starting point for restoring business confidence in obtaining foreign financing, this success is aleverage for Indonesia's bargaining power at the G20 Summit in Johannesburg, South Africa, this weekend.
Bank Indonesia (BI) announced that Indonesia's external debt fell 1.82% to USD 424.4 billion in Q3 2025, from USD 432.3 billion in Q2 2025.
On an annual basis, Indonesia's external debt decreased by 0.6% year-on-year (YoY) in Q3, after amounting to USD 426.84 in Q3-2024, which was partly influenced by slowing external debt growth in the public sector and contraction of external debt in the private sector.
In detail, government external debt was recorded at USD 210.1 billion, growing 2.9% YoY in Q3, slowing down compared to 10.0% YoY growth in the previous quarter.
Head of the BI Communication Department Ramdan Denny Prakoso explained that the reason for this slowdown was due to the slowdown in foreign capital inflows in the issuance of Government Securities (SBN). In this position, long-term debt dominates up to 99.9% of total government external debt.
"As one of the state budget financing instruments, government external debt is managed carefully, measured, and supports the financing of priority programs, including the health services and social activities sectors, government administration, education, construction, transportation and warehousing, as well as financial services and insurance," Denny explained in a written statement, Monday (17/11/2025).
Meanwhile, private sector external debt was recorded at USD 191 billion, lower than the position in Q2 of USD 193.9 billion, or contracted by 1.9% YoY.
This development continued the contraction of external debt of financial institutions by 3.0% YoY and the contraction of external debt of non-financial institutions by 1.7% YoY. The manufacturing industry, financial services and insurance, electricity and gas procurement, and mining and quarrying are the four sectors with the largest external debt.
With a well-maintained external debt portfolio, characterized by a debt ratio of 29.1% of GDP in Q3 and a dominance of 86.1% of long-term external debt from total debt, the government is committed to monitoring and coordinating the development of external debt to support development financing, while minimizing risks that affect stability.
Stay cautious
Despite a healthy external debt structure dominated by long-term debt, the government and the business community still need to anticipate a number of risks and prepare strategic measures. After all, debt is a double-edged knife, which can be evidence of the wisdom of financing and risk management, but also a signal of the need to strengthen the investment drive.
Deputy Chairman of the Indonesian Employers Association (Apindo) Sanny Iskandar underlined that while the decline in external debt helps maintain the perception of balance sheet stability and Indonesia's external risks, businesses have other considerations in seeking foreign financing, including the direction of global interest rates, exchange rate stability, and the availability of global liquidity.
"Many companies are currently still cautious about taking long-term foreign exchange loans because global interest rates are still quite high, the volatility of the US dollar is still strong, and global demand is still not quite stable," Sanny said when contacted. SUAR, Tuesday (11/18/2025).
The current situation of the decline in Indonesia's external debt, according to Sanny, must be recognized as the beginning of a gradual recovery in business confidence. However, decision-making to seek financing from abroad must still be very careful and wise, taking into account the stability of the exchange rate, borrowing costs, and the consistent pattern of strengthening global demand for some time to come.
Sharing a view with Sanny, Chief Economist of The Indonesian Economic Intelligence (IEI) Sunarsip assessed that the decline in external debt is an indication that foreign investment is experiencing a downward growth trend, especially since foreign investment usually requires loans from banks abroad, both as working capital and investment.
"If we pay attention, the decline in external debt occurred more in corporate external debt, especially in the mining, electricity, and manufacturing sectors. On the one hand, the decline in corporate external debt shows the corporation's efforts to improve its financial position. On the other hand, it means that the investment drive by corporations has also decreased," he explained.
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The current announcement of the decline in external debt, according to Sunarsip, still needs to be addressed carefully, however it needs to be appreciated. He reminded, to pursue a higher economic growth target, Indonesia needs a higher role of corporate investment, especially private corporations. Mobilizing capital investment in quantity and quality is the closest homework that must be considered immediately.
"Facts show that the relatively limited economic growth of 5% in the last three years is due to the low contribution of investment in the private sector. The decline in corporate external debt must be a concern for the government, especially regarding the goal of pursuing investment growth and increasing GDP," he concluded.
Raise bargaining power
Apart from being an instrument to measure the stability of the domestic economy, Indonesia's declining external debt also contains symbolic power to encourage the acceleration of global financial institution reform at the G20 Summit in Johannesburg, South Africa, November 22-23, 2025.
As a major country in the Global South, Indonesia's experience can amplify the interests of debtor countries that are now on the brink of bankruptcy due to loans that trigger dependency and debt crises, instead of bringing prosperity.
Executive Director of the International NGO Forum for Indonesian Development (INFID) Siti Khoirun Ni'mah emphasized that, with more than 800 million people living on less than USD 3 per day and a worrying global debt situation, Indonesia can be a voice for the importance of a fair global financial architecture for low-income countries.
"The current global economic architecture illustrates that countries that are late in paying their debts have dangerous economies and warns investors there to be careful. As the country's reputation deteriorates, they are forced to tighten fiscal, reduce social spending, and privatize national assets," Ni'mah said in Jakarta, Monday (17/11/2025).
With most emerging market debt denominated in US Dollars, the 11 rate hikes averaging 3.25% between 2022-2024 proved to depreciate local currencies and make import costs higher. Increasingly unfriendly interest rates have worsened the economic situation in these bankrupt countries.
"The G20 must be consistent with its principles: strong, inclusive and balanced growth. The leaders' agreement can put pressure on the World Bank to ensure that financing really alleviates poverty, and Indonesia can gain momentum to strengthen the interests of countries in the Global South, in addition to strengthening cooperation in finance," said Ni'mah.
