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Jakarta Post

Forex reserves more than adequate as Fed hike looms

Mark Lempp (The Jakarta Post)
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Jakarta
Fri, January 7, 2022

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Forex reserves more than adequate as Fed hike looms The Bank Indonesia logo is displayed on a gate to the Indonesian central bank in Jakarta on Feb. 4, 2011. (AFP/Romeo Gacad)

I

ndonesia’s stock of foreign currency and assets is well above the threshold generally considered adequate, as traders around the world brace for monetary policy tightening in the United States.

Bank Indonesia (BI) announced in a statement on Friday that the country’s foreign exchange (forex) reserves stood at US$144.9 billion at the end of December 2021. That is down $1 billion from November but up $9 billion, or 6.6 percent, over the full year, BI data show.

The monthly decline was attributed in part to the repayment of foreign debt by the government.

“The position of official reserve assets was equivalent to financing eight months of imports or 7.8 months of imports and servicing government external debt, and well above the international adequacy standard of three months [worth of] imports,” BI explained in the statement.

The central bank added that it considered that position sufficient “to support the external sector resilience and maintain macroeconomic and financial system stability.”

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Forex reserves include foreign cash, bonds and other assets denominated in foreign currency and are typically expressed in their US dollar value. They can be drawn on for external payments or to buttress the national currency against the threat of excessive devaluation, which may stem from events outside a country’s control, such as a global financial crisis or monetary policy changes by foreign central banks.

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