ndonesia’s foreign exchange (forex) reserves jumped by 3.5 percent last month, giving the central bank more funds it could use to prop up the rupiah in case further rate hikes in the United States put pressure on the currency.
As Bank Indonesia (BI) reported on Monday, its forex reserves amounted to US$145.2 billion at the end of March, up from $140.3 billion at the end of February, and the highest level since November 2021.
The $4.9 billion increase, which marks a fifth consecutive monthly rise, was partly attributed to tax revenue and the rise of government debt.
“The forex reserves position is equivalent to 6.4 months of imports or 6.2 months of imports and government external debt servicing, and above the international adequacy standard of around three months of imports,” BI noted in a statement published on its website on Monday.
The increase in forex reserves gives BI additional dry powder that it could deploy in the event of a worsening global economic situation, with Bank Mandiri warning in a statement on Monday: “The growing fear of a global economic slowdown could trigger [a] risk-off sentiment in the stock market, and the major central banks will mostly maintain ‘higher for longer’ global policy [rates] to tame inflation, [creating] challenges for inflow to the bond market.”
The note from Mandiri’s chief economist office suggests, however, that BI is well prepared for such a scenario, and the bank sees BI forex reserves at around the current level by the end of the year.
“All in all, we see foreign reserves remaining adequate,” reads the note from Bank Mandiri chief economist Faisal Rachman, arguing that the decline in commodity prices this year looked to be more gradual than earlier anticipated and that measures to keep more export revenue in the country “could also prevent the placement of assets abroad” and thereby support the rupiah during a time of heightened global uncertainty.
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