Foreign Exchange Reserves Increase by 2.2 Billion US Dollars in a Month, Because of DHE Policy?

Illustration (Photo: Doc. Antara)

JAKARTA – Bank Indonesia (BI) reported that the position of Indonesia's foreign exchange reserves at the end of January 2023 reached USD 139.4 billion.

Head of the Communications Department Erwin Haryono said the amount had increased compared to the position at the end of December 2022 of USD 137.2 billion. This means that there was an increase in foreign exchange reserves of 2.2 billion US dollars within one month.

"The increase in the position of foreign exchange reserves in January 2023 was influenced, among others, by the issuance of the government's global bonds as well as tax and service revenues," he said in a written statement on Tuesday, February 7.

According to Erwin, the position of foreign exchange reserves is equivalent to financing 6.1 months of imports or 6.0 months of imports and servicing the government's foreign debt.

Currently, the number of foreign payment instruments is above the international adequacy standard of around 3 months of imports.

"Bank Indonesia assesses that these foreign exchange reserves are able to support external sector resilience and maintain macroeconomic and financial system stability," he said.

Previously, the central bank had found a position in foreign exchange reserves that was disproportionate to the export value which had soared throughout 2022.

It is suspected that this is due to the attitude of exporters who prefer to place their funds abroad.

On this basis, the central bank then provides two incentives to strengthen the withdrawal of export proceeds (DHE). First, the imposition of an interest rate in accordance with the market mechanism for domestic exporter deposits.

Second, freeing the minimum reserve requirement (GWM) on national bank dollar deposits which are passed on to Bank Indonesia (pass-through).

"Going forward, Bank Indonesia views that foreign exchange reserves will remain adequate, supported by maintained economic stability and prospects, along with various policy responses in maintaining macroeconomic and financial system stability to support the process of national economic recovery," concluded Erwin.