JAKARTA (TheInsiderStories) – Bank Indonesia (BI) reported foreign exchange (forex) reserves at the end of April amounted to US$127.9 billion, rises compared to March at $121.0 billion, its reported today (05/08). The reserves are equivalent to 7.8 months of imports or 7.5 months of imports and servicing of official external debt, and are above the international adequacy standard of around the months of imports.
The central bank stated, the increase in foreign exchange reserves in April was mainly influenced by the issuance of global bonds $4.3 billion last month. Going forward, BI views that forex reserves remain adequate, supported by stability and a favorable economic outlook.
Recently, the Bank has poured Rp130 trillion ($8.67 billion) to stabilized the government bond market since the beginning of this year. The intervention has been taken after foreigners released their portfolios in the secondary market.
“We are committed to remaining in the market to stabilize the Rupiah by selling (US) Dollars through cash or through domestic non-deliverables forwards,” said the governor Perry Warjiyo latterly.
Based on the central bank data, during January to March, around Rp160 trillion has flew from the financial market. He added, almost all types of investors are also trying to release the assets of all emerging markets including Indonesia.
On March 2, the Bank has injected liquidity of $3.2 billion to local bank through various policies to help the economy and to reduce the sell-off on the financial market. According to Warjiyo, the central bank has announced five steps to give more liquidity to the market.
First, the central bank ready to conduct intervention on a larger scale in the Domestic Non-Deliverable Forward market, the spot market, and the government bond market. Second, lowering the statutory reserve requirements for conventional and Islamic commercial banks’ foreign exchange reserves from 8 percent to 4 percent starting March 16.
Third, reduce the reserve requirement of export-import financing by 50 basis points starting early April. Fourth, expand the underlying types for foreign investors so that they can provide a hedging alternative to Rupiah ownership. And fifth, reaffirming that global investors can take advantage of custodian services from global and domestic banks to invest domestically.
According to him, the uncertainty of global financial markets due to COVID-19 was rises although China has successfully overcome the epidemic. The latest assessment by the central bank showed that the government of China efforts has a positive impact lift up the economic activity in the world second largest economy.
However, the uncertainty of the financial markets increased after the discovery of virus cases widespread across the globe. Global investors are attracting funds to be placed in developing countries and transferring financial assets and commodities that are considered safe, such as United States treasury bonds and gold.
This condition then put pressure on the world financial markets and exerted considerable depreciation pressure on many global currencies, including Indonesia. Currently, he said, BI, government and other authorities are taking steps to stabilize the Rupiah and mitigate the impact of COVID-19 risk on the domestic economy.
He conveyed, the government has and will continue to increase the fiscal stimulus space and provide ease of doing business in the real sector, including tourism and export-import activities. While, the central bank continues to consistently maintain monetary stability, the Rupiah rate, financial markets, and drive the economic growth momentum.
Going forward, said Warjiyo, BI will continue to monitor developments of the financial markets and the economy, including the impact of COVID-19 and continue to strengthen the policy mix and coordination with the government and relevant authorities.
The spread of the coronavirus, which has infected more than 119,000 people worldwide with around 4,200 death tolls as of March 11, has disrupted business activity in various countries and global supply chains. Indonesia reported 34 confirmed cases and one death.
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