By Setyo Wijayanto, Capital Market and Financial Sector Analyst at Beritakeuangan
At the Bank Indonesia (BI) Board of Governors’ Meeting (RDG) on June 17–18, 2026, in addition to deciding to raise the BI Rate, the Deposit Facility rate, and the Lending Facility rate by 25 bps each, policies related to stabilizing the rupiah exchange rate were also established. In this regard, BI mandated the implementation of a reduction in the threshold for cash foreign exchange purchases against the rupiah without underlying assets to USD 10,000 per participant per month.
Additionally, BI adjusted the threshold for the requirement to submit supporting documents for foreign currency fund transfers abroad from an equivalent amount exceeding USD 50,000 to an equivalent amount exceeding USD 25,000. Behind these two policies, which take effect on July 1, 2026, it is worth examining Indonesia’s current and future foreign exchange (forex) needs, along with the challenges and strategies ahead.
Using external debt data as a reference, Indonesia’s external debt—based on BI data across various currencies—reached USD439.77 billion as of April 2026. Of this total debt, foreign debt denominated in U.S. dollars amounted to USD269.25 billion, accounting for a dominant 61.22 percent, followed by debt denominated in rupiah at USD81.58 billion (18.55 percent) and debt denominated in euros at USD40.68 billion (9.25 percent).
Meanwhile, foreign debt in several other foreign currencies accounted for 10.97 percent. The most important point to note is that Indonesia’s total foreign debt showed an upward trend from USD394.76 billion in 2022 to USD433.47 billion in 2025, with a compound annual growth rate (CAGR) of 3.17 percent.
This increase in Indonesia’s external debt is primarily driven by a rise in government external debt, which is projected to reach USD214.27 billion in 2025, growing at a CAGR of 4.74 percent. This debt is further projected to rise by 3.67 percent year-over-year (yoy) to USD216.42 billion as of April 2026, accounting for 49.21 percent of the total.
This is primarily influenced by the upward trend in SBN issuance in both international and domestic markets, with the outstanding value of SBNs reaching USD142.96 billion in 2025—representing a CAGR of 3.00 percent from 2022 to 2025.
As of April 2026, the outstanding SBN rose 2.41 percent year-over-year to USD144.62 billion, consisting of USD94.73 billion in international SBNs and USD49.89 billion in domestic SBNs. Meanwhile, foreign debt originating from loans and recorded by the Central Bank stood at USD71.80 billion and USD30.11 billion, respectively.
Most of the government’s foreign debt is denominated in U.S. dollars, amounting to USD105.69 billion or 42.87 percent, followed by the rupiah (21.37 percent), the euro (15.28 percent), the Japanese yen (6.56 percent), and the remainder in various other world currencies. This foreign debt is utilized by various economic sectors.
The health services and social activities sector accounted for 22.00 percent of the total debt, followed by the government administration, defense, and mandatory social security sectors at 20.51 percent. Other sectors with double-digit contributions to the government’s foreign debt include education services (16.17 percent) and construction (11.51 percent) as of April 2026. The remaining 29.81 percent was absorbed by a number of other economic sectors.
Apart from the government, foreign debt also originates from the private sector, which consists of financial institutions—both banks and non-banks—and non-financial institutions. Private foreign debt reached USD194.53 billion in 2025, decreasing at a CAGR of 0.77 percent compared to USD199.09 billion in 2022. Financial News
As of April 2025, private external debt stood at USD193.25 billion, down 0.70 percent year-over-year (yoy), primarily driven by a 6.68 percent yoy decrease in banks’ external debt to USD32.04 billion. Of this total private external debt, external debt from non-financial corporations accounted for the dominant share at 80.85 percent.
The composition of private external debt was largely in U.S. dollars, accounting for 84.63 percent, or the equivalent of USD163.55 billion, followed by CNY (7.82 percent), while other currencies, including the rupiah, accounted for 7.55 percent. This private external debt was primarily channeled into the manufacturing sector (27.10 percent), financial services and insurance (19.43 percent), electricity and gas supply (18.65 percent), and mining and quarrying (14.44 percent). Other sectors contributed significantly less, with a cumulative share of 20.38 percent.
The increase in foreign debt held by the government and the central bank has an impact on foreign exchange needs, particularly when such foreign debt matures. Based on original maturity, the portion of government and central bank debt maturing within one year rose from just 2.02 percent in 2022 to 25.59 percent in 2025, and is projected to rise further to 31.34 percent—equivalent to USD21.31 billion—by April 2026.
Meanwhile, the share of private debt maturing within one year is projected to decline from 97.98 percent (2022) to 74.41 percent (2025) and further to 68.66 percent as of April 2026. For maturities of more than one year, the share of government external debt also increased from 56.15 percent (2022) to 60.05 percent (2025) and rose to 60.58 percent as of April 2026. The share of private external debt, conversely, fell from 43.85 percent (2022) to 39.95 percent (2025) and then decreased to 39.42 percent as of April 2026.
A similar trend can be observed based on remaining maturity, where government and central bank foreign debt maturing within one year rose from 22.78 percent (2022) to 39.21 percent (2025), and further increased to 43.11 percent as of April 2026. The share of government and central bank foreign debt with a remaining maturity of more than one year also shows an upward trend, rising from 55.01 percent (2022) to 58.63 percent (2025), and then increasing to 59.23 percent.
Conversely, the share of private-sector debt with a remaining maturity of up to one year declined from 77.22 percent (2022) to 60.79 percent (2025) and further decreased to 56.89 percent as of April 2026. In line with this, the share of private debt with a remaining maturity of more than one year also decreased to 40.77 percent as of April 2026, compared to 41.37 percent (2025) and 44.99 percent (2022).
The upward trend in the government’s and central bank’s foreign debt positions—based on remaining maturities of up to 1 year and over 1 year—poses a challenge for both institutions in meeting their foreign exchange needs in the short, medium, and long term. Furthermore, although showing a decline, the private sector’s foreign debt positions with remaining maturities of up to 1 year and over 1 year still make a material contribution. Bank Comparison
Furthermore, dependence on the U.S. dollar remains very high, with the share of government and central bank foreign debt denominated in that currency standing at 42.87 percent. The even higher share of private-sector foreign debt in U.S. dollars—84.63 percent as of April 2026—also highlights the risk of debt concentration in that currency.
The availability of sufficient foreign exchange to meet the demand for the U.S. dollar and other major world currencies is crucial, particularly for the repayment of Indonesia’s foreign debt upon maturity. This is because the U.S. dollar is officially produced and printed solely by the United States government.
The circulation of this currency in Indonesia is influenced by international transactions, foreign investment, imports from financial institutions or global central banks, and tourism. Unfortunately, BI does not release specific percentages regarding the share of the U.S. dollar in foreign exchange reserves (cadev), so it is not possible to determine with certainty whether U.S. dollar needs are being met through these reserves.
The availability of third-party funds in foreign currency within the Indonesian banking sector reached approximately Rp10,076.51 trillion, or the equivalent of USD558.20 billion, as of April 2026. However, this figure cannot be used as a reference for meeting foreign exchange needs because these funds are held by third parties within the national banking industry.
On a global scale, the U.S. dollar still dominates central bank financial instruments compared to other world currencies. According to IMF data, the global foreign exchange reserves market share by currency is dominated by the USD, with a market share of 56.77 percent, equivalent to USD7.46 trillion in the fourth quarter of 2025. Meanwhile, the euro’s contribution reached USD2.66 trillion, or 20.25 percent, followed by the Japanese yen at USD758.8 billion, accounting for 5.78 percent.
This dominant share of the USD has actually declined compared to its 70.80 percent share in 4Q01. In other words, it took 25 years—with an average annual decline in the USD’s contribution to global foreign exchange reserves of 0.96 percent—for the USD’s market share to fall to 56.77 percent.
A de-dollarization policy requires a significant amount of time and consistent implementation, as there is potential for international political factors to interfere with the policy’s success, in addition to the fact that dependence on the U.S. dollar remains high to this day.
In light of this, the author believes that to increase the supply of foreign exchange in the domestic market, both short-term and long-term strategies are needed, taking into account the challenges currently faced by Indonesia. In the short term, restoring investor confidence following Moody’s and Fitch’s downgrade of Indonesia’s sovereign credit rating outlook to “negative” must be addressed immediately.
The various concerns raised by rating agencies regarding economic conditions and governance must be addressed immediately. This is especially true given that S&P is expected to release the results of its annual credit rating review of Indonesia in the near future. A potential downgrade of the outlook to negative and/or a rating downgrade by S&P would increase pressure on capital outflows from Indonesia’s capital markets, thereby affecting foreign exchange liquidity in the domestic market.
In the context of the stock market, although Indonesia remains classified as an emerging market (EM), the findings of the MSCI 2026 Global Market Accessibility Review must be addressed by regulators and the Indonesia Stock Exchange (IDX) regarding transparency issues. MSCI’s concerns—including the downgrade of the “information flow” rating to negative, ownership transparency, and indications of coordinated trading—must be addressed immediately.
The next MSCI evaluation, scheduled for November 2026, is expected to generate a positive response from investors in the stock market. The potential outflow of foreign funds and continued pressure on the IHSG will negatively impact the depreciation of the rupiah and the liquidity of the U.S. dollar in foreign markets, meaning that continued intervention by the Bank of Indonesia (BI) will lead to a reduction in foreign exchange reserves.
The Bank of Indonesia’s (BI) 100-basis-point increase in the BI Rate over the past two months—bringing it to 5.75 percent—and the intensification of SRBI auctions, which are expected to boost capital inflows, are viewed as short-term solutions. During June, BI successfully raised Rp132.50 trillion from SRBI auctions, a 17.82 percent increase from the end of May, which is expected to have a positive impact on the increase in foreign holdings of SRBI.
This increase was primarily driven by hikes in SRBI interest rates of 64 bps, 78 bps, and 78 bps to 7.26 percent, 7.54 percent, and 7.70 percent for the 6-, 9-, and 12-month tenors, respectively. Indonesia’s current foreign exchange reserves stand at USD 144.90 billion as of May 2026, a slight decrease of 0.89 percent compared to the previous month.
To ensure a more sustainable flow of foreign currency—particularly the U.S. dollar—it must be supported by stronger export performance. Unfortunately, Indonesia’s total export value through May 2026 grew at a slower pace of 3.02 percent year-over-year (yoy) to USD115.36 billion, influenced by a 3.81 percent yoy decline in total export volume to 271.19 million metric tons, according to BPS data. Geographical Reference
The lower growth in total export value compared to the 6.98 percent year-over-year rate through May 2025, coupled with a higher increase in total import value of 15.24 percent year-over-year to USD111.33 billion, resulted in a sharp decline in the trade surplus of 73.81 percent year-over-year to just USD4.03 billion.
Read also: IDX Chief’s Response After Indonesia’s Capital Market Faces Downgrade to Frontier Market
For the record, Indonesia finally recorded a trade deficit of USD1.61 billion as of May 2026, having last posted a trade deficit in April 2020. Therefore, the diversification of export markets and the enhancement of value added in Indonesia’s export products must be prioritized amid external challenges related to global purchasing power and supply. Furthermore, the implementation of a “single window” export policy must strengthen the competitiveness of the national economy and not be solely profit-oriented.
Finally, in the long term, foreign exchange distribution in Indonesia can be improved by creating a conducive investment climate. The size of the domestic market is no longer the primary factor; rather, it must be reinforced by infrastructure quality, regulatory certainty, labor productivity, ease of doing business, and consistent government policies supporting investment.
Indonesia’s decline in competitiveness, as reported by the IMD World Competitiveness Ranking at both the global and regional levels, indicates a weakening of several fundamental economic factors. Indonesia’s global ranking dropped by 8 places to 48th in 2026.
This decline also reflects a downward trend following the country’s previous achievement of 27th place in 2024. At the regional level, Indonesia’s ranking fell to 14th in 2026 from 11th the previous year, out of a total of 15 countries in the Asia-Pacific region.
