Indonesia: FX Reserves shrunk in March – UOB


Economist at UOB Group Enrico Tanuwidjaja and Haris Handy assess the latest FX Reserves figures in Indonesia.

Key Quotes

“Indonesia’s foreign exchange reserves fell by USD1.7bn to USD137.1bn in March, as the central bank intervene to steady the Rupiah amid capital outflows triggered by rising US Treasury yields. The latest reserve level was equivalent to 10.1 months of import financing or 9.7 months of imports and servicing government’s external debt. This is well above the international adequacy standard of around 3 months of imports. Bank Indonesia views that the official reserve assets position was able to support the external sector resilience and maintain macroeconomic and financial system stability.”

“The decline of reserve assets in March was also attributable to the government’s external debt payments in accordance with the payment maturity pattern. Going forward, we might see a moderate build-up in FX reserves especially later on in the 2H21 underpinned by capital inflows, more proceeds from exports, as well as other FX earnings, as the global economy recover with the vaccine as a game changer. Nevertheless, downside risks remain on the back of the ongoing uncertainty from COVID-19 development, US Treasury yield and inflation expectation, which may result in capital outflows and slower FX earnings.”

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