Bank Indonesia's Stabilization Policies Bolster Rupiah Amid Global Market Uncertainty

Bank Indonesia (BI) Governor Perry Warjiyo has stated that the exchange rate of the Rupiah can be controlled through central bank stabilization policies. He noted that this month alone, the Rupiah has strengthened its exchange rate.

"After weakening by 2.43% in January 2024, the Rupiah's exchange rate has strengthened by 0.77% point to point in February, specifically until February 20, 2024," Perry revealed during a press conference at his office on Wednesday (21/2/2024).

Perry attributed the robust Rupiah exchange rate to the stabilization policies implemented by BI. Additionally, the increasing influx of foreign capital into the domestic financial market aligns with investors' positive perceptions of the country's resilient economic prospects.

With these developments, the Rupiah's exchange rate has only slightly depreciated by 1.68% from the end of December 2023, outperforming the depreciations of the Korean Won, Malaysian Ringgit, and Thai Baht by 3.69%, 4.27%, and 5.31%, respectively.

Looking ahead, Perry anticipates that the Rupiah's exchange rate will remain stable, with a tendency to strengthen driven by the continued influx of foreign capital.

"This is supported by BI, as well as the strengthening of pro-market monetary operation strategies through the optimization of SRBI, SVBI, and SUVBI instruments," Perry stated.

Furthermore, Bank Indonesia continues to enhance coordination with the government, banking sector, and business community to support the implementation of foreign exchange placement instruments for Export Natural Resources (DHE SDA) in line with Presidential Regulation No. 36 of 2023.

Increasing Capital Inflows

Amidst high global financial market uncertainty, foreign capital inflows into the domestic financial market continue to rise. Portfolio investment recorded net inflows of US$3.1 billion in the first quarter of 2024, as of February 19, 2024.

Indonesia's foreign exchange reserves position at the end of January 2024 remained high at US$145.1 billion, equivalent to financing for 6.6 months of imports or 6.4 months of imports and government external debt payments.

"This amount is above the international adequacy standard of around 3 months of imports," Perry emphasized.

Overall, Indonesia's Balance of Payments in 2024 is expected to maintain a surplus. Perry stated that this projection is supported by the continued surplus in the capital and financial transactions balance, in line with the positive inflow of foreign capital.

Meanwhile, the current account is expected to remain healthy, with a projected deficit ranging from 0.1% to 0.9% of GDP.

"Investors' positive perceptions of the domestic economic outlook are improving, along with attractive investment returns," Perry concluded.

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