Indonesia's International Investment Obligations Decree In The Second Quarter Of 2022

Illustration (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) said that Indonesia's International Investment Position (PII) in the second quarter of 2022 recorded a declining net obligation. It was revealed that in the last quarter PII Indonesia recorded a net obligation of US$ 270.4 billion (21.3 percent of GDP).

Head of the Communications Department Erwin Haryono said the figure was lower than the net obligation at the end of the first quarter of 2022 of 287.8 billion US dollars (23.6 percent of GDP).

"The decrease in net liabilities stems from the decline in the position of Foreign Financial Obligation (KFLN) accompanied by an increase in the position of Foreign Financial Asset (AFLN)," he said in a written statement on Monday, September 26.

According to Erwin, the decline occurred in line with the sloping value of domestic financial instruments, amid increasing the flow of direct investment inflows and portfolio investments.

It was explained that Indonesia's KFLN position fell 2.3 percent on a quarterly basis (quarter to quarter/qtq) from US$720.8 billion at the end of the first quarter of 2022 to US$704.3 billion at the end of the second quarter of 2022.

"The decline in KFLN's position was mainly due to other factors related to the value of domestic financial instruments in the nomination of rupiah in line with the decrease in prices and strengthening the US dollar exchange rate against rupiah," he said.

Then, further slowdowns were blocked by KFLN transactions that recorded a surplus in the form of direct investment inflows and portfolio investments in the second quarter of 2022 in line with investor optimism for prospects for economic recovery and a maintained climate of domestic investment.

Meanwhile, Indonesia's AFLN position has increased mainly due to the increase in the position of portfolio investment assets and other investments abroad.

Erwin said that at the end of the second quarter of 2022, AFLN's position rose by 0.2 percent (qtq) from US$433.0 billion at the end of the previous quarter to US$433.9 billion.

This development is supported by the position of portfolio investment assets and other investments that have increased along with the increase in asset placement abroad. The increase in AFLN's position is hampered by other changes related to the strengthening of the US dollar against the majority of the world's major currencies and the decline in the prices of several foreign assets," he explained.

Bank Indonesia itself views that the development of PII Indonesia in the second quarter of 2022 is maintained and supports external resilience. This is reflected in the ratio of Indonesia's PII's net obligations to GDP in the second quarter of 2022 which was maintained in the range of 21.3 percent, down from the ratio in the previous quarter of 23.6 percent.

In addition, the structure of PII Indonesia's obligations is also dominated by long-term instruments (93.4 percent), especially in the form of direct investment.

"In the future, Bank Indonesia believes that the performance of PII Indonesia will be maintained in line with efforts to recover Indonesia's economy from the impact of the Covid-19 pandemic, which is supported by the synergy of the policy mix with the government, as well as other relevant authorities," concluded Erwin.