Indonesia: Selected Issues

IMF Staff Country Reports, June 25, 2023

Source details

Canonical URL

Indonesia: Selected Issues

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Published: June 25, 2023
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798400247125.002

Summary findings

• The paper examines lessons for a changing investor base in Indonesia, focusing on decisions of different investors to hold local-currency (LC) government debt and how these reflect global and domestic conditions.
• Results point to the importance of global factors especially for nonresidents (NRs).
• Domestic investor holdings are mostly associated with higher debt security issuances.
• Bank of Indonesia acts as a residual financier under adverse conditions.
• Results are mostly robust to different specifications.
• NR holdings of LC debt support the bond market and domestic credit, but financial market volatility may be higher.

Investor base dynamics and marginal investors

• The paper finds that domestic banks and nonbanks are typically the marginal investors of new LC debt issued in emerging markets (EM).
• In normal times, domestic banks and nonbanks absorb most of the new issuances of LC debt in the sample of EMs.
• During episodes of large declines in the NR share of LC debt, domestic nonbanks assume the key role in absorbing new debt supply.
• This shift in marginal investor roles has implications for market depth and volatility, given varying capacities of investor groups.

Implications for Indonesia

• The finding that domestic nonbanks are critical during large NR share declines is important for Indonesia, given the limited role of domestic nonbanks in the economy.
• Further deepening of the domestic retail investor base, in line with the Indonesian authorities’ medium-term debt strategy, could:
  • Support market depth.
  • Reduce volatility in LC government debt markets.

Key statistics and publication metadata

• Pages: 28
• Volume: 2023
• Issue: 222
• Series: Country Report No. 2023/222
• DOI: https://doi.org/10.5089/9798400247125.002
• Stock No: 1IDNEA2023003
• ISBN: 9798400247125
• ISSN: 1934-7685
• Publication date shown on the landing page: June 25, 2023

International Monetary Fund. Asia and Pacific Dept "Indonesia: Selected Issues", IMF Staff Country Reports 2023, 222 (2023).

Content in this bundle

• Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023
  • Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023 (Markdown version)
  • Indonesia: Selected Issues; IMF Country Report No. 23/222; May 5, 2023 (PDF)