Bank Indonesia, the central bank of Indonesia, announced that the nation's foreign exchange reserves had grown to USD 119.9 billion at end-February 2017, up from USD $116.9 billion in the preceding month (and the third straight month of growth). The increase was primarily attributed to foreign exchange receipts, which includes tax revenues and the government's oil & gas export proceeds. The rise was also possible on the back of the withdrawal of government foreign loans as well as the auction of Bank Indonesia foreign exchange bills (SBBI).
Agus Martowardojo, the Governor of Bank Indonesia, said the rising foreign exchange reserves in February 2017 were primarily caused by foreign exchange earnings stemming from oil & gas exports, and secondly by capital inflows. Up to the end of February a total of IDR 26 trillion (approx. USD $2 billion) entered Indonesia. When part of these funds is deposited at the central bank then it has a positive impact on the country's foreign exchange reserves, Martowardojo added.
Meanwhile, the receipts over the past month surpassed the use of foreign exchange for repayments of government external debt and the maturing of Bank Indonesia's foreign exchange bills.
The current foreign exchange reserve asset position can adequately cover 8.9 months of imports or 8.5 months of imports and servicing of the government's external debt repayments, well above the international standards of reserves adequacy at three months of imports.
Rising foreign exchange reserves also support the performance of the Indonesian rupiah. Throughout the month of February 2017 the rupiah's value versus the greenback was stable (IDR 13,343 per US dollar on 31 January 2017 against IDR 13,347 per US dollar at 28 February 2017). Thus, despite rising foreign exchange reserves, the rupiah did not appreciate. It is assumed that Bank Indonesia is keeping the rupiah at a flat level and guard it against (too much) appreciation ahead of looming higher US interest rates.
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia