JAKARTA (TheInsiderStories) - Indonesia’s foreign exchange (forex) reserves position as of end October 2015 stood at $100.7 billion, lower than the end of September 2015 level registered at $101.7 billion, a central bank (BI) spokesman Andiwiana said in a press statement.
This development was attributable to the use of foreign exchange for government foreign debt payments and to stabilize Rupiah exchange. It is in line with Bank Indonesia’s commitment which has and will be in the market in order to stabilise the Rupiah rate in accordance with the fundamental to support macroeconomic and financial system stability.
With these developments, official reserve assets at the end of October 2015 can adequately cover 7.1 months of imports or 6.6 months of imports and servicing of Government external debt repayment, well above the international standards of reserves adequacy at 3 months of imports. Bank Indonesia considers the position of official reserve assets has positive impact on efforts to strengthen the resilience of the external sector and maintain the sustainability of Indonesian economic growth.
Currently, BI introduce new measures in an effort to increase the country’s foreign exchange (FX) supplies. BI economic and monetary policy executive director Juda Agung, the measures will include setting a new benchmark for FX forward selling transactions without underlying reasons.
An FX forward selling is a transaction in which a party agrees to sell a certain amount of FX at a specific time and at an agreed price. At the moment, such transactions can be conducted without underlying reasons, but only up to US$1 million per transaction.
“We are going to increase the maximum limit to $5 million per transaction,” Juda said .
He said the move would provide greater convenience for people or companies wanting to sell their FX, thus triggering higher inflows of foreign-denominated currencies into the money market.
At the same time, BI’s own FX reserves have been depleting as the central bank carries out intervention to reduce the sharp volatility of the rupiah in the money market and as companies repay their external debts.
Other measures will include a deduction of withholding tax charged on interest income from time deposit.
BI is also planning to renew several arrangements with its counterparts to ensure the availability of liquidity support to back the declining FX reserves.