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Forex reserves climb for third month in row
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The logo of Bank Indonesia adorns the main gate of the bank's headquarters in Jakarta. (Antara/File/-)
The country’s foreign reserves grew for the third consecutive month in August, as shown by data from Bank Indonesia (BI).
The reserves stood at US$113.5 billion in August, higher than the $111.4 billion recorded in July. It was the third consecutive monthly rise and the highest so far this year.
In a statement, the central bank attributed the increase to tax revenues and export earnings from the oil and gas sector, a drawing-down of the government’s offshore borrowings and sales of foreign currency-denominated BI securities (SBI).
The August figure is sufficient to fund 8.7 months of imports or 8.3 months of imports and the repayment of government debt. It is also higher than the international benchmark of three months of import financing.
Bank Central Asia (BCA) economist David Sumual said on Wednesday that the increase was in line with expectations, pointing to the strong inflows of portfolio investments. The inflows helped to stabilize the rupiah against the US dollar and led to reduced BI intervention in the money market.
BI Governor Agus Martowardojo told reporters recently that Rp 162 trillion ($12.38 billion) of foreign funds had entered the financial system from the beginning of this year until August. The amount is four times higher than the Rp 43 trillion recorded during the same period in 2015.
Data from the Indonesia Stock Exchange (IDX) also reveal that net buying reached more than Rp 14 trillion in August alone.
David said the foreign reserves had not been affected by the ongoing tax amnesty program as the amount of repatriated funds in the program remained low. As of Wednesday, repatriated funds only amounted to Rp 14.7 trillion.
“Most of the [expected] repatriated funds have not entered Indonesia because tax amnesty participants have until year-end to bring back the funds in the program’s first phase.”
The amnesty program is being carried out in three phases. The first phase will end in September, the second in December and the third in March 2017.
PermataBank economist Josua Pardede said the government must keep an eye on fiscal risks to prevent capital outflows. “Any internal shocks will cause the foreign reserves to shrink [as a result of outflows],” he said.
The possibility of another rate hike in the US is a factor that also needs to be considered. However, Bloomberg has reported that “worse-than-expected” US data is likely to persuade the US Federal Reserve to hold off raising interest rates this month.
