This week, Bank Indonesia (BI) will report the position of foreign exchange (forex) reserves, consumer and retail sales survey in June - Photo: Special

JAKARTA (TheInsiderStories) – Indonesia’s foreign exchange (forex) reserves at the end of December 2019 were recorded at US$129.2 billion, up from $126.6 billion in the previous month, Bank Indonesia (BI) has reported on Wednesday (01/08).

The forex reserves are equivalent to 7.6 months of imports or 7.3 months of imports and servicing of official external debt and are above the international adequacy standard of around three months of imports.

“The forex reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability,” the central bank said.

The forex reserves development in this month was mainly influenced by oil and gas forex receipts, withdrawal of government foreign loans, and other foreign currency receipts, it said.

“Going forward, Bank Indonesia views forex reserves to remain adequate, supported by stability and sound economic prospects,” it said.

Previously, BI Governor Perry Warjiyo also predicted this month’s forex reserves to increase. This is in line with the rapid flow of capital and the realization of Indonesia’s balance of payment data which is predicted to be a surplus in the fourth quarter of 2019.

“We estimate foreign exchange reserves will be higher than $127 billion,” Warjiyo told reporters at his office last weekend.

The central bank noted, Indonesia’s balance of payments has a deficit of $46 million. The figure improved compared to the previous quarter which was a deficit of $2 billion. Cumulatively, the January-September balance of payments surplus of $396 million.

The current account deficit in the third quarter reached $7.7 billion, or 2.7 percent of the gross domestic product (GDP). The data also improved compared to the previous quarter of $8.5 billion or 3.22 percent of GDP.

The forex reserves movement is one factor influenced BI 7 days reverse repo rate (BI7DRRR). Recently, the policymaker holds BI-7DRR rate at 5 percent, deposit facility rate 4.25 percent and lending facility rate 5.75 percent.

At the same time, the central bank also relaxed the reserve requirement for commercial and sharia banks by 50 bps to 5.5 percent and 4 percent, respectively.

In the latest board meeting, Warjiyo said the policy aims to boost the liquidity in the market and to maintain economic growth amid slowing global economy.

He continued, through the policies, the central bank aimed to drive the loan growth and enlarge financing at the same time stabilizing the financial system. In addition, the policymakers want to keep the countercyclical capital buffer at zero percent and the buffer ratio of macro-prudential policy at 4 percent with repo flexibility at 4 percent.

Even some countries have relaxed its monetary policy by cutting the interest rate, it was not adequate to anticipate the slowdown of global economic growth, he adds. Going forward, Warjiyo saw that the global economic growth getting better, but still cautiously on the tension between the two largest economies in the world.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com