In a recent report, the Ministry of Finance revealed a noteworthy surge in foreign capital inflow into Indonesia’s financial market, marking a significant development in the country’s economic landscape. As of the third week of July 2023, the total foreign capital influx amounted to an impressive Rp105.4 trillion year-to-date (YTD), reflecting growing investor confidence in Indonesia’s prospects amidst the global economic recovery.
Finance Minister Sri Mulyani Indrawati shared valuable insights into the composition of this capital inflow, attributing the dominant portion to the purchase of government bonds (SBN) by foreign investors. Cumulatively, these investments reached Rp86.18 trillion (YTD), indicating a strong appeal for Indonesia’s government securities, which have been sought after for their stability and attractive returns.
“Indonesia remains stable and has garnered significant interest in SBN, resulting in a remarkable capital inflow of Rp86.18 trillion until June 2023,” Minister Indrawati asserted during the APBN Kita online press conference on July 24, 2023.
The Minister further highlighted the specific inflow figures for June and July 2023, which stood at Rp17.53 trillion and Rp1.43 trillion, respectively. Additionally, she underscored the significant capital inflow to Indonesia’s stock market, reaching Rp19.22 trillion (YTD), reflecting the growing enthusiasm among foreign investors to participate in the country’s equity market.
Despite the encouraging trends, the Ministry of Finance also addressed the capital outflow, amounting to Rp4.38 trillion in June 2023. This outflow was an essential aspect to consider while analyzing the overall movement of foreign capital in the Indonesian financial landscape.
Furthermore, Minister Indrawati emphasized the improving yield on government bonds in terms of local currency, signifying a positive development for the country’s domestic financial market. This improvement in yield indicates the resilience of Indonesia’s financial system and the ability to attract diverse investor portfolios.
“We are witnessing a decreasing trend in yields, enabling us to manage the cost of funds effectively, especially considering The Fed’s ongoing interest rate hikes,” Minister Indrawati remarked, acknowledging the challenges posed by global market dynamics and the importance of maintaining stability in the face of such fluctuations.
The report also highlighted the resilience of the Indonesian rupiah, which has demonstrated a consistent appreciation trend since the beginning of 2023, strengthening by 4.7 percent (YTD). This remarkable performance reflects the underlying strength of Indonesia’s economy and its ability to weather external uncertainties while attracting foreign investors seeking stability and growth opportunities.
Moreover, the report compared the movement of the Indonesian rupiah with other major currencies worldwide, showcasing Indonesia’s strong standing among emerging markets. The Indonesian rupiah ranked third in terms of the highest value movement, following the Mexican peso (MXN) and the Brazilian real (BRL). In contrast, the Japanese yen (JPY) and the Turkish lira (TRY) have faced significant depreciation during the same period, further highlighting Indonesia’s favorable position in the global currency landscape.
In light of these positive developments, the Ministry of Finance expressed its commitment to continue implementing robust economic policies and facilitating a conducive environment for foreign investments. The Indonesian government remains dedicated to strengthening the financial infrastructure, fostering sustainable growth, and enhancing investor confidence as it embarks on a path of economic recovery and prosperity.
