Bank Indonesia: Foreign Exchange Reserves Rose in December 2015
The central bank of Indonesia (Bank Indonesia) announced that the country's foreign exchange reserves have risen considerably in December 2015. At the end of the last month of 2015 the foreign exchange assets stood at USD $105.9 billion, up from USD $100.2 billion in the preceding month. This is a remarkable result as the global and domestic economy is still plagued by uncertainty and volatile capital flows (in December the Federal Reserve finally raised its key Fed Fund Rate by 25 basis points).
Bank Indonesia stated that the nation's foreign exchange reserves rose six percent in December (the largest monthly growth pace since April 2012) on the back of the withdrawal of government borrowing, oil & gas export proceeds, and receipts of global (government) bonds. These receipts exceeded foreign exchange needed by the central government and Bank Indonesia to pay foreign debt and stabilize the rupiah.
In early December the central government sold USD $3.5 billion of sovereign (US dollar-denominated) bonds. Meanwhile, foreign investors purchased a net IDR 10 trillion (approx. USD $720 million) of local currency government debt in the last month of 2015.
The higher level of foreign exchange reserves also imply that Bank Indonesia has more ammunition to support the rupiah exchange rate. This year pressure on the rupiah is expected to persist as there are expected to be more interest rate hikes in the USA, while concern about China's economic slowdown (particularly a weaker yuan) is expected to flare up, possibly giving rise to capital outflows from emerging markets. However, with Indonesia's foreign exchange reserves rising, investors should have some more confidence in rupiah, at least for the near-term.
The central bank is content with the current level of reserve assets. It covers 7.7 months of imports or 7.4 months of imports and servicing of government external debt repayments, well above the international standards of reserves adequacy at three months of imports.
Foreign Exchange Reserves Indonesia:
