Bank Indonesia Urged to Be Cautious as Foreign Reserves Decline

TEMPO.CO, Jakarta - Director of the Digital Economy Center of Economic and Law Studies (CELIOS), Nailul Huda, has commented that Bank Indonesia has been using its foreign exchange reserves excessively compared to some other countries. In April 2025, Indonesia's foreign reserves decreased by US$4.6 billion, falling from US$157.1 billion to US$152.5 billion.

Nailul drew a comparison with Vietnam, which he noted spent approximately US$2 billion to maintain its exchange rate stability. "So, Bank Indonesia has to be careful and evaluate the effectiveness and efficiency of these foreign reserve instruments," Nailul told Tempo on Sunday, May 11, 2025.

Nevertheless, Nailul Nailul acknowledged that Bank Indonesia's interventions have been successful in maintaining the rupiah's exchange rate stability, although it remains at a relatively high level. The rupiah's exchange rate against the US dollar saw a temporary weakening due to ongoing trade tensions, which caused volatility in global financial markets. The rupiah briefly reached Rp17,000 per US dollar after the Eid al-Fitr holiday in 2025. In the trading week ending on Friday, May 9, 2025, the rupiah closed at Rp16,520 per US dollar.

Separately, Fithra Faisal Hastiadi, a senior economist at Samuel Sekuritas Indonesia, pointed out that the decline in foreign reserves in April 2025 represents the lowest level since mid-2022. He also anticipates that Bank Indonesia will likely continue its intervention strategies amid global market uncertainty stemming from the trade war.

Samuel Sekuritas Indonesia forecasts that Indonesia's foreign reserves will likely range between US$150 billion and US$155 billion in the second quarter of 2025, with an expected improvement in the second half of the year. "Bank Indonesia is likely to increase its foreign reserves again, supported by strong commodity exports, the recovery of the tourism sector, and inflows of foreign capital," Fithra said in a written statement quoted on Sunday, May 11, 2025.

Ramdan Denny Prakoso, the Executive Director of Bank Indonesia's Communication Department, explained that the decrease in foreign reserves was influenced by the government's foreign debt payments and the central bank's policy to stabilize the rupiah's exchange rate. He also affirmed that Indonesia's foreign reserve position remains above the international standard for adequacy, which is typically around 3 months of imports.

"This level is equivalent to financing 6.4 months of imports or 6.2 months of imports and the government's foreign debt payments," Ramdan said in an official release on Thursday, May 8, 2025.

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