Bank Indonesia's Foreign Exchange Reserves Capacity for Imports and Foreign Debt Payments Continues to Decline

Bank Indonesia (BI) reported that foreign exchange reserves decreased by US$4.2 billion to US$132.2 billion in July 2022. The previous month, Indonesia's foreign exchange reserves stood at US$136.4 billion.

These reserves are equivalent to 6.2 months of import cover or 6.1 months of import and government foreign debt payments. This figure remains above the international adequacy standard of approximately 3 months of import cover.

The ability of foreign exchange reserves to finance imports and pay off foreign debt has shown a downward trend since the beginning of 2021. The decrease in foreign exchange reserves last month was influenced by government foreign debt payments and the need to stabilize the rupiah exchange rate.

Other factors include the rise in commodity prices in the global market and the appreciation of the United States dollar (US$), making the cost of imported goods more expensive. Meanwhile, maturing government foreign debt payments tend to increase in line with the rising amount of government foreign debt.

However, foreign exchange reserves remain above the international adequacy standard of approximately 3 months of import cover. BI's foreign exchange reserves are also better than those of several countries that are no longer able to finance imports. This has resulted in those countries experiencing food and energy crises, thus triggering social unrest.

"These foreign exchange reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability," as stated in a press release issued by BI on Friday (August 5).