Indonesia's Financial Service Authority noted foreign capital out from the country reached US$953.47 million since the beginning of 2019 until May 17, 2019 - Photo: Pixabay.

JAKARTA (TheInsiderStories) – Indonesia’s foreign exchange reserves fell in February 2018 from the previous month, Bank Indonesia (BI) data shows. The nation’s foreign exchange reserves stood at US$128.06 billion, down from $131.98 billion at the end of the preceding month.

BI said the drop in foreign exchange assets in February was primarily attributed to the use of foreign exchange for repaying government foreign debts as well as to stabilize Indonesia’s rupiah exchange rate (in accordance with the currency’s fundamentals).

Despite the decline, the foreign exchange reserves are still adequate to cover 8.1 months of imports or 7.9 months of servicing the government external debts, well above international standards at 3 months of imports.

The Indonesian rupiah strengthened by 13 points to reach Rp13,743 from Rp13,756 per U.S dollar at the Jakarta Interbank Spot Dollar Rate on Tuesday’s opening.

The U.S dollar depreciated against some Asian currencies, including the rupiah, following the issuance of the US trade protection policy by imposing tariffs on the imports of steel and aluminum.

Meanwhile, declining foreign exchange reserves was also attributed to banks’ falling foreign currency term deposits at Bank Indonesia (this is in line with residents’ necessity to repay their foreign currency liabilities).

Indonesia’s foreign exchange reserves, which remained near their all-time record high position, are an important buffer to stabilize the rupiah exchange rate in times of pressure (capital outflows) that are triggered by global economic (or political) turmoil.

Currently, the U.S is behind many of the economic and political uncertainties or developments that are impacting negatively on emerging market assets.

Although BI may need to use part of foreign exchange reserves to defend the rupiah in the last month of the year. Indonesia’s foreign exchange reserves could rise before the year-end as the government raised $3 billion through the issuance of Sukuk global in March 2018.