Indonesia's foreign exchange reserves shrink by US$7 billion in three months

The fluctuating exchange rate of the rupiah, in line with the appreciation of the US dollar against major world currencies, has led Bank Indonesia (BI) to continuously intervene in the market. As a result, BI's foreign exchange reserves have been steadily declining over the past three months.

BI data shows that Indonesia's foreign exchange reserves in April 2018 had shrunk by US$7.11 billion (Rp 101 trillion) from the January level of US$131.98 billion (Rp 1,770 trillion), which was also its all-time high. The outflow of foreign investors from the domestic financial market, the current account deficit, and the limited supply of dollars due to a trade deficit have caused the rupiah to depreciate to over Rp 14,100 per US dollar.

(Read Databoks: Indonesia's Foreign Exchange Reserves Surge 583% from Pre-Crisis Levels)

Despite the decline, BI's foreign exchange reserves remain secure, as they are still sufficient to finance 7.4 months of imports and government external debt. This figure is higher than the international standard of approximately 3 months of imports. For information, the current account deficit in Q1 2018 was recorded at US$5.5 billion, and the trade deficit from January to April this year amounted to US$1.31 billion.

(Read Databoks: The Composition of Bank Indonesia's Foreign Exchange Reserves)