Jakarta. Bank Indonesia reported the country’s foreign exchange (forex) reserves dropped to $139.3 billion in May from April’s $144.2 billion.

Bank Indonesia spokesman Erwin Haryono attributed the decline to the government’s foreign debt payment. 

“As well as to anticipate the need for the banking foreign currency liquidity in line with increasing economic activities,” Erwin said on Friday.

According to Erwin, the current forex reserves are equivalent to 6.1-month import financing. This is well above the international benchmark of 3 months of imports.

“We believe that the forex reserves are enough to support our external resilience and keep the macroeconomy and financial system stable,” Erwin said.

Faisal Rachman, an economist working for Bank Mandiri, said that Indonesia’s downstream industry could help spur investment coming into the country, thus boosting its forex reserves.

“Efforts to maintain the export proceeds, including the Bank Indonesia’s foreign currency term deposit to manage the export proceeds, as an instrument for export proceeds management, to a certain extent, can hinder the transfer of assets overseas,” Faisal said.

The overall forex reserves are also expected to remain at a satisfactory level by the end of this year, thanks to the gradual decline in commodity prices and an effective foreign currency term deposit for export proceeds, according to Faisal.

He added: “Indonesia’s forex reserves are forecast to stand at between $135 billion to $155 billion by the end of this year, compared to $137.2 billion posted in 2022.”

The robust foreign reserves can support the rupiah exchange rate against the US dollar amidst global uncertainties.

"We estimate that the rupiah exchange rate against the US dollar will close at Rp 14,864 per US dollar by the end of 2023," Faisal said.