Indonesia' foreign exchange reserves stood at US$126.4 billion in August - Photo by Bank Indonesia.

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) noted, country’s foreign exchange reserves at the end of August 2019 amounted to US$126.4 billion, increase 0.39 percent compared to $125.9 billion in the previous month,” the bank said in the written statement today (09/6).

The increasing of foreign exchange reserves in August 2019 was mainly influenced by oil and gas foreign exchange receipts and other foreign exchange receipts, it said.

The foreign exchange reserves are equivalent to financing 7.4 months of imports or 7.1 months of imports and payment of government foreign debt and are above the international adequacy standard of around 3 months of imports.

The central bank assesses that foreign exchange reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability. Going forward, the bank views foreign exchange reserves to remain adequate, supported by stability and sound economic prospects.

Meanwhile, BI gave a surprise with the second cut of 7 days reverse repo rate (BI-7DRR) by 25 bps to 5.5 percent. Deposit facility and lending facility rates also dropped by 25 bps to 4.75 percent and 6.25 percent, respectively.

BI’ Governor Perry Warjiyo said the decision has been taking to give a stimulus for the banking industry. He continued, the policy was in line with low inflation forecast and improving investment returns on domestic financial assets.

Its expected these indicator as a first step to boost the economic growth from the impact of the global economic slowdown. Currently, central banks in the emerging market lowered their benchmark interest rates to boost economic growth.

Warjiyo revealed, from the domestic side, the inflation rate is expected at the BI’ target of 3.5 percent by the end of this year. In 2020, inflation will be at 3 percent plus-minus 1 percent.

He projected that the Indonesian economy in 2019 will be below the midpoint of the 5 to 5.4 percent and in the range of 5.1 – 5.5 percent in 2020. Its expected besides government and public spending, investment and export become the engine of growth.

The governor also sees the Current Account Deficit (CAD) will be in the range of 2.5 percent and 3 percent of GDP in 2019 and 2020. Warjiyo revealed BI will strengthen the external resiliency to attract foreign investment in lowering the CAD in the range of government’ target.

In June 2019, the loan growth was slow down to 9.9 percent from 11.1 percent in May 2019. But he optimistic the loan growth still have a chance to grow the range of 10 – 12 percent in 2019 and 11 – 13 percent in 2020.

Warjiyo stated BI will use macro-prudential policies to encourage bank lending and expand the financing for the economy. Payment system policies and financial market deepening are also continuously strengthened to support economic growth.

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