Indonesia's Forex Reserves US$123B in February
Bank Indonesia Headquarters at Central Jakarta - Photo: Special

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) noted foreign exchange (forex) reserves amounted to US$124.3 billion at the end of September, said the central bank today (10/07). This value is lower 1.66 percent than the position at the end of August, worth of $126.4 billion.

BI wrote in an official statement, the forex reserves declining was influenced by the need of the government to refinance foreign debt and reduced placement of foreign exchange at the Bank.

It said, the position of forex reserves is equivalent to financing 7.2 months of imports or 7 months of imports and payment of government foreign debt. This foreign exchange reserve is also above the international adequacy standard around 3 months of import.

Bank Indonesia assessed that the reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability. Going forward, the central bank stated, forex reserves to remain adequate, supported by stability and sound economic prospects.

Recently, BI cut its 7 Days Reverse Repo (BI-7DRR), Deposit Facility interest, and Lending Facility Interest rate by 25 bps to 5.25 percent, 4.5 percent, and 6 percent.

The Governor Perry Warjiyo explained, the policy was consistent with inflation forecasts that remained low and investment returns on domestic financial assets that remained attractive. In addition, the decline in the benchmark interest rate is also a pre-emptive step to encourage domestic economic growth.

To encourage the economic growth, the central bank also improves the macro prudential policies by adding a loan component received by the bank, as a component of bank funding sources in the intermediary ratio.

The Bank also relaxed the loan to value (LTV) ratio for property financing by 5 percent, down payment for motorized vehicles in the range of 5 to 10 percent and additional reduction in the LTV ratio for motorized vehicles with environmental insight 5 percent each. This provision effective starting Dec. 2, 2019.

Bank Indonesia also strengthened its monetary operations by implementing a reverse repo of government bond for all tenors from seven days to 12 months. Going forward, BI will continue to implement an accommodative policy mix in line with low inflation forecasts, maintained external stability, and the need to continue to drive economic growth. momentum.

Meanwhile, the decline in the benchmark interest rate is also based on global economic conditions. Warjiyo revealed, the continuing tensions between US and China trade put pressure on the world economy and kept uncertainty about global financial markets high.

Warjiyo explained BI needs to concern the dynamics of the global economy because they can influence the economic growth and inflows of foreign capital. In domestic economy, Indonesia has faced the impact of global economy uncertainty.

Exports are not expected to improve due to global demand and declining commodity prices, although some manufactured export products, such as motor vehicles, continue to grow positively. This condition has a negative impact on investment growth, especially non-construction investment, while the growth of construction investment is quite well driven by the development of national strategic projects.

Private consumption grew also limited, although household consumption grew steadily supported by the distribution of government social assistance.

Therefore, BI will continue the policy mix so, the government can still achieve economic growth in the range of 5-5.4 percent in 2019 and the range of 5.1-5.5 percent in 2020 .

Written by Staff Editor, Email: theinsiderstories@gmail.com