The level of international reserves in May 2014 reached USD 107.048 billion, which was an increase of USD 1.485 billion compared with the position in April 2014. The international reserve position can finance 6.2 months of imports, which criteria makes it fulfill international adequacy standard (three months of imports). Subsequently, in April 2014, international reserves reached USD 105.56 billion, which represented an increase of USD 2.97 billion compared with the position in March 2014. The increase in the level of international reserves came as a consequence of an increase in oil and gas exports during April–May 2014 period and improvement in capital flow to Indonesia in May 2014.  Bank Indonesia, through PBI No. 14/25/PBI/2012 on foreign exchange revenue derived from exports and external debt related withdrawals seemed to have registered success in forcing exporters to deposit their revenues in foreign exchange banks. Consequently, the policy has contributed to improving Indonesian international reserve position. Meanwhile, in March 2014, international reserve position decreased by USD 149 million which represents a decline of 0.145% compared with the level registered in the previous month. The decline in the international reserve position is attributable to efforts by the government to repay USD 2 billion of its bond obligations that reached maturity. To that end, Bank Indonesia, expects the international reserve position to decline in quarter II-2014. On a seasonal basis, quarter II is often characterized by maturity of securities that require payment of interest, dividends, and royalties. read more

Rupiah Continues to Depreciate

High inflationary pressure in Indonesia is often attributable to non-monetary factors such as poor infrastructure, floods, and natural disasters. Such events have often ended up sending prices of food prices higher, which in turn fuels inflation. Inflation in January 2014 rose sharply compared to the position in December 2013 (8.08%, y-o-y). Besides, the increase in prices of commodities that are under government direction and control—such as the increase in liquefied petroleum gas which occurred at the beginning of the year—also contributed to the drastic rise in inflation. read more

As a consequence of weakening economic growth, the volume of money in (M2) circulation in broad sense also showed a decline. M2 growth in October 2013 slowed to 13.02% (y-o-y) from 14.57% (y-o-y) in the previous month. On the contrary, growth in M1 increased to 10.48% (y-o-y) from 9.08% (y-o-y) in the previous month.
Figure 4: Money Supply, 2011 – 2013* (in IDR Trillion)
Growth in M2 showed declined in October 2013, conversely, MI growth higher compared with the previous month.

Source: Bank Indonesia and  CEIC (2013)
*= October 2013 read more