Indonesia’s Foreign Exchange Reserves Increase US$ 0.8 Billion

foreign exchange reserves

Bank Indonesia (BI) released a report on the Indonesia’s foreign exchange reserves in June 2022. According to the BI report, Indonesia’s foreign exchange reserves in June increased compared to the previous month. One of the reasons for this increase was the issuance of government bonds denominated in foreign currency.

Bank Indonesia (BI), Thursday (7/7), reported that foreign exchange reserves at the end of last month stood at US$ 136.4 billion. An increase compared to the previous month which was US$ 135.6 billion.

“The increase in the position of it in June 2022 was influenced, among other things, by the issuance of government global bonds as well as tax and service receipts,” said BI in a written statement.

The position of foreign exchange reserves, continued the BI report, is equivalent to financing 6.6 months of imports or 6.4 months of imports and servicing government foreign debt. Also above the international adequacy standard of about three months of imports.

“Bank Indonesia views it as capable of supporting external sector resilience and maintaining macroeconomic and financial system stability. Going forward, Bank Indonesia views foreign exchange reserves as adequate, supported by maintained economic stability and prospects, along with various policy responses to promote economic recovery, ” wrote BI’s statement.

On the other hand, Bank Permata economist Josua Pardede said capital outflows occurred in the stock and bond markets, where foreign investors recorded a net sell of US$ 220 million in the stock market and US$ 737 million in the bond market.

In line with the capital outflow that occurred, the rupiah exchange rate decreased by 2.16% throughout June 2022.

Furthermore, Josua added, amid the capital outflow, the government succeeded in issuing Samurai Bonds with a nominal benchmark size of JPY 81 billion or equivalent to Rp. 9.04 trillion at the beginning of last June.

The movement of foreign exchange reserves in June 2022 was observed to be stable because it was supported by the supply of foreign exchange from an export performance which was still positive, thus encouraging a trade balance surplus in the month under review.

Furthermore, Bank Danamon Indonesia Macroeconomic Analyst Irman Faiz estimates that there is potential for another decline in foreign exchange reserves. He calculated foreign exchange reserves will move in the range of US$ 130 billion by the end of 2022. This is lower than the position of foreign exchange reserves at the end of 2021 which amounted to US$ 145.9 billion.

However, the position of foreign exchange reserves going forward is believed to be still strong in supporting the movement of the rupiah exchange rate. He estimates that the rupiah exchange rate at the end of the year will move in the range of Rp. 14,700 per US dollar to Rp. 14,800 per US dollar.