Indonesia’s Foreign Exchange Reserves Decline to US$139.3 Billion in May 2023

According to the latest data released by Bank Indonesia (BI), Indonesia’s foreign exchange reserves position in May 2023 witnessed a decrease, amounting to US$139.3 billion compared to the previous month’s position of US$144.2 billion. This decline is attributed to various factors, including the repayment of foreign bank debt and the rising demand for foreign exchange in the banking sector.

BI’s Head of the Communications Department, Erwin Haryono, emphasized that the decrease in foreign exchange reserves was primarily influenced by the need to fulfill government foreign debt obligations and to anticipate the growing demand for foreign exchange liquidity, aligned with the expanding economic activities.

In an official statement, he said, “The decline in foreign exchange reserves position is partly due to the need for government foreign debt payments and the anticipation of foreign exchange liquidity needs in line with the growing economic activities.”

To provide a broader context, it is worth noting that Indonesia has consistently maintained its foreign exchange reserves above the US$140 billion mark since February 2023. Comparatively, during the same month in the previous year, the foreign exchange reserves stood above US$140 billion in February 2022.

Erwin Haryono further highlighted the significance of Indonesia’s foreign exchange reserves, stating that they are equivalent to financing approximately 6.1 months of imports or 6.0 months of imports and government foreign debt payments. Moreover, the reserves position in May 2023 exceeds the international adequacy standard, which recommends having reserves equivalent to around 3 months of imports.

BI’s assessment underscores the resilience of Indonesia’s external sector, emphasizing the role of foreign exchange reserves in supporting macroeconomic stability and the integrity of the financial system. Haryono stated, “BI assesses that the foreign exchange reserves are capable of supporting the resilience of the external sector and maintaining macroeconomic and financial system stability.”

Looking ahead, BI remains committed to strengthening the resilience of Indonesia’s external sector, in line with its comprehensive policy framework aimed at preserving macroeconomic stability and fostering a robust financial system that supports sustainable economic growth.

By prioritizing these objectives, BI aims to ensure that the country’s foreign exchange reserves continue to play a pivotal role in supporting Indonesia’s economic well-being amidst global uncertainties and challenges.