Central Bank Uses Foreign Exchange Reserves to Support the Rupiah
To ease pressures on the IDR rupiah, Indonesia's central bank has used about USD $2.0 billion of its foreign exchange reserves to support the currency as the country's continuing trade deficit as well as concerns about the possible increase in price of subsidized fuel in June has caused much uncertainty about the level of inflation in the near future and puts downward pressure on the rupiah. Indonesia's foreign exchange reserves fell to USD $105.2 billion in late May 2013 from USD $107.3 billion at the end of April.
The rupiah weakened 1.2 percent so far this year. In 2012, Indonesia's currency lost 6.12 percent against the US dollar as market participants were concerned about the country's current account deficit that stood at USD $24.1 billion or 2.7 percent of GDP.
Indonesia's trade deficit has suffered, partly because of the country's high oil consumption (resulting in high oil imports), which is stimulated by huge fuel subsidies. The government intends to reduce these subsidies this June but it is a step which entails political risks as it triggers social unrest and higher inflation.
Last week, the Indonesian government announced its revised 2013 government budget, which includes an upward revision of the rupiah to IDR 9,600 from 9,300 to the US dollar.
| Source: Bank Indonesia
| 2008 | 2009 |
2010 | 2011 | 2012 | 2013² | |
| Foreign Exchange Reserves¹ |
51.6 | 66.1 | 96.2 | 110.1 | 112.8 | 105.2 |
¹ in billion USD dollar
² at end May 2013
Source: Bank Indonesia