Decline in Forex Reserves Narrow as Govt Incurs More Foreign Debt

KATADATA - The withdrawal of foreign debt has successfully softened the downward trend in Indonesia’s foreign exchange reserves last month. Although recorded the lowest level since January 2014, the country’s forex reserves did not fall below US$100 billion or just shrink US$500 million compared to the previous month to US$100.2 billion.

Executive Director of Bank Indonesia’s Communication Department Tirta Segara said that the decline in forex reserves in November 2015 was a result of government's spending on external debt payment and the Rupiah exchange rate intervention in the forex market. Throughout last month, Indonesian Central Bank spent IDR241.6 trillion for open market operations. This was bigger than that in October 2015 of IDR218 trillion.  

However, foreign exchange earnings from oil and gas and the withdrawal of foreign debt were able to prevent further decline in forex reserves. Based on forex reserve components as of 30 November 2015, the amount of base money reached IDR895.2 trillion. This was bigger than the previous month due to the increase in the circulation of banknotes and coins from IDR520.2 trillion to IDR526.6 trillion.

The net foreign asset position in November 2015 reached IDR1345.1 trillion or jumped from the previous month of IDR1331.6 trillion due to the withdrawal of foreign debt. As a result, net domestic asset was minus IDR449.9 trillion, or swell from the previous month of minus IDR440.4 trillion. Forex reserve position in November 2015 is still sufficient to finance 7.1 months of imports, or about 6.9 months of imports and foreign debt payment which is still above the standard adequacy threshold of three months of imports.