Indonesia's Foreign Exchange Reserves Continue to Decline Through September 2022

Indonesia's foreign exchange reserves stood at US$130.0 billion or Rp1.98 quadrillion in September 2022 (exchange rate Rp15,100 per US dollar).

This amount decreased by approximately Rp21.14 trillion, or 1.06%, from the previous month. Compared to January 2022, BI's foreign exchange reserves in September 2022 had decreased by Rp158 trillion, or about 7.4%.

This decline in foreign exchange reserves occurred due to the government's need to maintain the stability of the rupiah exchange rate and to pay off maturing foreign debt.

As a result, the ability of foreign exchange reserves to pay off the government's foreign debt and finance imports also decreased to 5.7 months in September 2022, compared to 6 months in August 2022.

Nevertheless, Indonesia's foreign exchange reserves remain above the international adequacy standard, which is around 3 months of imports.

Throughout this year, the ability of Indonesia's foreign exchange reserves to finance imports and pay off the government's foreign debt has shown a downward trend, as seen in the graph. However, Erwin Haryono, Head of the Bank Indonesia Communication Department, stated that the amount remains adequate.

"Bank Indonesia assesses that these foreign exchange reserves are able to support the resilience of the external sector and maintain macroeconomic and financial system stability," Erwin explained in his press release on Friday (7/10/2022).

"Looking ahead, Bank Indonesia views foreign exchange reserves as remaining adequate, supported by maintained economic stability and prospects," Erwin continued.

Meanwhile, the rising Federal Reserve (The Fed) interest rates have resulted in the strengthening of the US dollar and the weakening of global currencies, including the rupiah. The strengthening US dollar has made the cost of stabilizing the rupiah's value more expensive, thus eroding BI's foreign exchange reserves.

Since The Fed raised its benchmark interest rate by 75 basis points (bps), the rupiah exchange rate in the Jakarta Interbank Spot Dollar Rate (JISDOR) has consistently been above Rp15,000 per US dollar. On Monday (10/10/2022), the rupiah closed at Rp15,299 per US dollar.