JAKARTA (TheInsiderStories) – Indonesia’s foreign reserve position stood at US$123.09 billion as of end-June 2017, lower than the end of May 2017 level registered at $124.95 billion, Bank Indonesia (BI) reported.
According to the central bank, the reserve assets position at the end of June 2017 was still strong to finance 8.9 months of imports or 8.5 months of imports and servicing of government external debt repayments, well above the international standards of reserves adequacy at 3 months of imports.
Bank Indonesia considers the position of official reserve assets is still able to strengthen the resilience of the external sector and maintain the sustainability of Indonesian economic growth.
Furthermore BI’s spokesman Tirta Segara explained, the decline in the reserve assets in June 2017 was mainly to meet banks’ foreign currency needs in anticipation of Lebaran’s long holiday.
The Bank considers the decline in reserve assets in June 2017 was temporary due to bank’s precautionary measure. In addition, the favorable export outlook, the positive optimism for the domestic economy post-investment grade, and the conducive conditions in global financial markets will further support the strengthening of reserve assets to maintain the resilience of the external sector.
Looking ahead, Tirta said, Bank Indonesia will continue to maintain reserve adequacy to support preserved macroeconomic and financial system stability.
Meanwhile, Indonesia’s International Investment Position recorded a net liability of $335.2 billion (35.0 percent of GDP) at the end of Q1 2017, up on the net liability of $318.3 billion (34.1 percent of GDP) at the end of Q4 2016.
The increase was due to stronger increase in Foreign Financial Liabilities (FFL) compared to the increase in Foreign Financial Assets (FFA). The development was congruous with the capital and financial account surplus in Indonesia’s balance of payments during the reporting period supported by improving domestic economic growth andpositive perception on domestic economic outlook.
Bi stated, Indonesia’s FFA position increased 3.3 percent (q-t-q) or $9.9 billion to $308.6 billion at the end of Q1 2017. The increase was supported by increased reserve assets, direct investment, portfolio investment, and other investment.
The increase in direct investment was in line with rising asset value in some investment destination countries and weakening of the US dollar against several major global currencies.
The increase in portfolio investment was mainly influenced by private sector net purchases of foreign securities. Meanwhile, the increase in other investments was mainly attributable to the private sector placements of financial assets abroad.
Indonesia’s FFL position at the end of Q1/2017 rose 4.3 percent (q-t-q) or $26.8 billion to $643.9 billion. The increase was mainly driven by mounting portfolio investment inflows in rupiah-denominated instruments (SUN, SPN, and stocks) as well as the government’s global sukuk issued in March 2017.
It was in line with stronger domestic economic growth and the investor positive perception on Indonesia’s economic outlook. In addition, increase in FFL position was also influenced by the weakening of the US dollar against rupiah and surging value of the rupiah-denominated investment instruments depicted in the Jakarta Composite Index rally.
Bank Indonesia views that the development of Indonesia’s IIP until Q1/2017 remained healthy. Nevertheless, BI continues to be aware of the risk of Indonesia’s net IIP liability position to the economy.
Going forward, Bank Indonesia believes Indonesia’s IIP will be healthier in line with the monetary and macro-prudential policy mix implemented by Bank Indonesia.
(Written by Linda Silaen, Email: email@example.com)