Currency Risk and Debt Maturity: Their Effects on the Resilience of Indonesia’s Foreign Exchange Reserves
DOI:
https://doi.org/10.15408/sjie.v14i2.46526Keywords:
external debt, exchange rate risk, macroeconomic stability, debt structureAbstract
Research Originality: This study uncovers the unexpected negative impact of long-term external debt on Indonesia’s foreign exchange reserves, challenging conventional beliefs about debt stability.
Research Objectives: This study provides important—and occasionally surprising—new insights into the dynamics of Indonesia's external debt and its impact on the country's foreign exchange reserves.
Research Methods: Using recent time series data from 2013–2024 and the tried-and-true OLS regression method, this study provides a thorough and timely analysis of the relationship between Indonesia's foreign exchange reserves and the structure of its external debt.
Empirical Results: The empirical results indicate that long-term debt has a negative impact on foreign exchange reserves, whereas Rupiah and foreign currency-denominated debts have positive effects. Notably, short-term debt shows no significant impact. These findings offer practical guidance for Indonesia’s external debt management, supporting better debt prioritization and enhanced financial resilience.
Implications: These novel insights offer valuable guidance for optimizing debt management to strengthen Indonesia’s financial resilience and economic stability.
JEL Classification: E4, E5, E6
How to Cite:
Afriana, W., Damanhuri, D. S., Taryono.,& Amanah, S. (2025). Currency Risk and Debt Maturity: Their Effects on the Resilience of Indonesia’s Foreign Exchange Reserves. Signifikan: Jurnal Ilmu Ekonomi, 14(2), 537-548. https://doi.org/10.15408/sjie.v14i2.46526.
References
Abosedra, S., Shahbaz, M., & Nawaz, K. (2016). Modeling Causality Between Financial Deepening and Poverty Reduction in Egypt. Social Indicators Research, 126(3), 955–969.
Acheampong, A. O. (2019). Modeling for Insight: Does Financial Development Improve Environmental Quality? Energy Economics, 83, 156–179. https://doi.org/10.1016/j.eneco.2019.06.025.
Acheampong, A. O., Appiah-Otoo, I., Dzator, J., & Agyemang, K. K. (2021). Remittances, Financial Development and Poverty Reduction in Sub-Saharan Africa: Implications for Post-COVID-19 Macroeconomic Policies. Journal of Policy Modeling, 43(6), 1365–1387. https://doi.org/10.1016/j.jpolmod.2021.09.005.
Anderson, E., d’Orey, M. A. J., Duvendack, M., & Esposito, L. (2018). Does Government Spending Affect Income Poverty? A Meta-regression Analysis. World Development, 103, 60–71. https://doi.org/10.1016/j.worlddev.2017.10.006.
Appiah-Otoo, I., Chen, X., Song, N., & Dumor, K. (2022). Financial Development, Institutional Improvement, Poverty Reduction: The Multiple Challenges in West Africa. Journal of Policy Modeling, 44(6), 1296–1312.
Asnawi, A., Hasyim, P., Anwar, K., & Roni, M. (2023). The Effect of Foreign Debt, Foreign Direct Investment (FDI), and Government Spending on Economic Growth in 5 ASEAN Countries. Journal of Malikussaleh Public Economics, 6, 20-30. https://doi.org/10.29103/jompe.v6i1.12138.
Babecký, J., Havránek, T., Matějů, J., Rusnák, ., Šmídková, ., Vasicek, B. (2014). Banking, Debt and Currency Crises: Early Warning Indicators for Developed Countries. Journal of Financial Stability, 15, 1-17. https://doi.org/10.1016/j.jfs.2014.07.001.
Cepparulo, A., Cuestas, J. C., & Intartaglia, M. (2017). Financial Development, Institutions, and Poverty Alleviation: An Empirical Analysis. Applied Economics, 49(36), 3611–3622. https://doi.org/10.1080/00036846.2016.1265074.
Dartanto, T. (2022). Natural Disasters, Mitigation and Household Welfare in Indonesia: Evidence from a Large-scale Longitudinal Survey. Cogent Economics and Finance, 10(1), 2037250. https://doi.org/10.1080/23322039.2022.2037250.
Deng, Q., Li, E., & Zhang, P. (2020). Livelihood Sustainability and Dynamic Mechanisms of Rural Households Out of Poverty: An Empirical Analysis of Hua County, Henan Province, China. Habitat International, 99, 102160. https://doi.org/10.1016/j.habitatint.2020.102160.
Donou-Adonsou, F., & Sylwester, K. (2016). Financial Development and Poverty Reduction in Developing Countries: New Evidence from Banks and Microfinance Institutions. Review of Development Finance, 6(1), 82–90. https://doi.org/10.1016/j.rdf.2016.06.002.
Elkhalfi, O., Chaabita, R., Benboubker, M., Ghoujdam, M., Zahraoui, K., El Alaoui, H., Laalam, S., Belhaj, I., & Hammouch, H. (2024). The Impact of External Debt on Economic Growth: The Case of Emerging Countries. Research in Globalization, 9. 100248. https://doi.org/10.1016/j.resglo.2024.100248.
Erlando, A., Riyanto, F. D., & Masakazu, S. (2020). Financial Inclusion, Economic Growth, and Poverty Alleviation: Evidence from Eastern Indonesia. Heliyon, 6(10), e05235. https://doi.org/10.1016/j.heliyon.2020.e05235.
Fahad, S., Nguyen-Thi-Lan, H., Nguyen-Manh, D., Tran-Duc, H., & To-The, N. (2022). Analyzing the Status of Multidimensional Poverty of Rural Households by Using Sustainable Livelihood Framework: Policy Implications for Economic Growth. Environmental Science and Pollution Research, 30, 16106–16119. https://doi.org/10.1007/s11356-022-23143-0.
Fitriadi, F., Jiuhardi, J., Busari, A., Ulfah, Y., Hakim, Y. P., Erwin Kurniawan, A., & Darma, D. C. (2022). Using Correlation to Explore the Impact of Corona Virus Disease on Socio-economics. Emerging Science Journal, 6, 165–180. https://doi.org/10.28991/esj-2022-SPER-012.
Gibson, J., & Olivia, S. (2020). Direct and Indirect Effects of COVID-19 on Life Expectancy and Poverty in Indonesia. Bulletin of Indonesian Economic Studies, 56(3), 325–344. https://doi.org/10.1080/00074918.2020.1847244.
Kaidi, N., Mensi, S., & Ben Amor, M. (2019). Financial Development, Institutional Quality, and Poverty Reduction: Worldwide Evidence. Social Indicators Research, 141(1), 131–156. https://doi.org/10.1007/s11205-018-1836-0.
Kiendrebeogo, Y., & Minea, A. (2016). Financial Development and Poverty: Evidence from the CFA Franc Zone. Applied Economics, 48(56), 5421–5436. https://doi.org/10.1080/00036846.2016.1176114.
Koh, W. C., Kose, M. A., Nagle, P. S., Ohnsorge, F. L., & Sugawara, N. (2020). Debt and Financial Crises. World Bank Policy Research Working Paper 9116.
Liu, W., Li, J., & Zhao, R. (2023). The Effects of Rural Education on Poverty in China: A Spatial Econometric Perspective. Journal of the Asia Pacific Economy, 28(1), 176–198. https://doi.org/10.1080/13547860.2021.1877240.
Liu, Y., & Xu, Y. (2016). A Geographic Identification of Multidimensional Poverty in Rural China Under the Framework of Sustainable Livelihoods Analysis. Applied Geography, 73, 62–76. https://doi.org/10.1016/j.apgeog.2016.06.004.
Marimuthu, M.; Khan, H.; Bangash, R. (2021). Is the Fiscal Deficit of ASEAN Alarming? Evidence from Fiscal Deficit Consequences and Contribution towards Sustainable Economic Growth. Sustainability 13, 10045. https://doi.org/10.3390/ su131810045.
Miranti, R. C. (2021). Is Regional Poverty Converging Across Indonesian Districts? A Distribution Dynamics and Spatial Econometric Approach. Asia-Pacific Journal of Regional Science, 5(3), 851–883. https://doi.org/10.1007/s41685-021-00199-3.
Mouandat, S. (2022). Currency Mismatches and Public Debt Management: What is an Effective Strategy for a Developing Country? Journal of Empirical Studies 9 1-14. https://doi.org/10.18488/66.v9i1.2917.
Olivia, S., Gibson, J., & Nasrudin, R. (2020). Indonesia in the Time of Covid-19. Bulletin of Indonesian Economic Studies, 56(2), 143–174. https://doi.org/10.1080/00074918.2020.1798581.
Rangkuty, D. M., & Hidayat, M. (2021). Does Foreign Debt Have an Impact on Indonesia's Foreign Exchange Reserves? Ekuilibrium: Jurnal Ilmiah Bidang Ilmu Ekonomi, 16(1), 85-93. https://doi.org/10.24269/ekuilibrium.v16i1.2021.pp85-93.
Rewilak, J. (2017). The Role of Financial Development in Poverty Reduction. Review of Development Finance, 7(2), 169–176. https://doi.org/10.1016/j.rdf.2017.10.001.
Sinaga, M., Manalu, A. Y., Hutauruk, R. P. S., Collyn, D., & Zalukhu, R. S. (2025). The Influence of Foreign Debt, Foreign Direct Investment, Exports, and Labor on Economic Growth in ASEAN Member Countries. Asian Development Policy Review, 13(1), 112–126. https://doi.org/10.55493/5008.v13i1.5307
Sehrawat, M., & Giri, A. K. (2016). Financial Development, Poverty and Rural-Urban Income Inequality: Evidence from South Asian Countries. Quality and Quantity, 50(2), 577–590. https://doi.org/10.1007/s11135-015-0164-6.
Sparrow, R., Dartanto, T., & Hartwig, R. (2020). Indonesia Under the New Normal: Challenges and the Way Ahead. Bulletin of Indonesian Economic Studies, 56(3), 269–299. https://doi.org/10.1080/00074918.2020.1854079.
Sosa-Padilla, C. (2018). Sovereign Defaults and Banking Crises. Journal of Monetary Economics, 99, 88–105. https://doi.org/10.1016/j.jmoneco.2018.07.004 .
Su, F., Song, N., Ma, N., Sultanaliev, A., Ma, J., Xue, B., & Fahad, S. (2021). An Assessment of Poverty Alleviation Measures and Sustainable Livelihood Capability of Farm Households in Rural China: A Sustainable Livelihood Approach. Agriculture, 11(12), 1230. https://doi.org/10.3390/agriculture11121230.
Suryahadi, A., Al Izzati, R., & Suryadarma, D. (2020). Estimating the Impact of COVID-19 on Poverty in Indonesia. Bulletin of Indonesian Economic Studies, 175–192. https://doi.org/10.1080/00074918.2020.1779390.
Tang, K., Li, Z., & He, C. (2023). Spatial Distribution Pattern and Influencing Factors of Relative Poverty in Rural China. Innovation and Green Development, 2(1), 100030. https://doi.org/10.1016/j.igd.2022.100030.
Thaler, D. (2021). Sovereign Default, Domestic Bank,s and Exclusion from International Capital Markets. The Economic Journal, 131(635), 1401–1427. https://doi.org/10.1093/ej/ueaa120.
Tohari, A., Parsons, C., & Rammohan, A. (2019). Targeting Poverty Under Complementarities: Evidence from Indonesia’s Unified Targeting System. Journal of Development Economics, 140, 127–144. https://doi.org/10.1016/j.jdeveco.2019.06.002.
Van Bon, N. (2015). The Relationship Between Public Debt And Inflation In Developing Countries: Empirical Evidence Based On Difference Panel GMM. Asian Journal of Empirical Research, 5(9), 128-142.
Vidyattama, Y. (2013). Regional Convergence and the Role of the Neighbourhood Effect in Decentralised Indonesia. Bulletin of Indonesian Economic Studies, 49(2), 193–211. https://doi.org/10.1080/00074918.2013.809841.
Wang, X., & Guan, J. (2017). Financial Inclusion: Measurement, Spatial Effects, and Influencing Factors. Applied Economics, 49(18), 1751–1762. https://doi.org/10.1080/00036846.2016.1226488.
World Bank. (2022). Poverty and Equity Brief Indonesia. Washington, D. C: World Bank.
Zhu, X., Chen, X., Cai, J., Balezentis, A., Hu, R., & Streimikiene, D. (2021). Rural Financial Development, Spatial Spillover, and Poverty Reduction: Evidence from China. Economic Research-Ekonomska Istrazivanja, 34(1), 3421–3439. https://doi.org/10.1080/1331677X.2021.1875859.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Wendra Afriana, Didin S. Damanhuri, Taryono Taryono, Siti Amanah
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
