BI's Policy Mix Seen Strengthening Indonesia's Foreign Exchange Reserves

Jakarta (ANTARA) - Bank Danamon Indonesia economist Hosianna Evalita Situmorang assesses that Bank Indonesia’s (BI) policy mix has the potential to strengthen Indonesia’s foreign exchange reserves for the remainder of the year, after the position increased again in June 2026 following five consecutive months of decline.

In the Macro Glint report received in Jakarta on Tuesday, Danamon economist Hosianna Evalita Situmorang assessed that BI’s policy of a 10 percent discount on swap hedging for foreign investors can lower hedging costs while simultaneously increasing the yield on rupiah-denominated assets that have been protected from foreign exchange risk.

“Thus strengthening the confidence premium for the sustainability of fund inflows into government bonds (SBN) and Bank Indonesia Rupiah Securities (SRBI),” Hosianna said.

This prospect is also supported by the central bank’s efforts to improve the yield structure of SRBI across various tenors to maintain the competitiveness of Indonesian investment instruments compared to other countries in the region.

Additionally, the Ministry of Finance’s plan to issue Panda Bonds worth USD 1 billion is seen as a way to diversify external financing sources while providing an additional foreign exchange liquidity buffer once the proceeds are received.

However, Hosianna noted that the impact of the Panda Bond issuance on foreign exchange reserves will depend on the timing of the issuance and the placement of the proceeds.

“(Panda Bonds) can diversify external financing sources and provide an additional foreign exchange liquidity buffer after the funds are received, although the impact on foreign exchange reserves will depend on the timing and placement of these funds,” she said.

Indonesia’s foreign exchange reserves increased to USD 145.6 billion in June 2026 from USD 144.9 billion in May 2026, marking the first increase after five consecutive months of decline.

BI stated that the increase was mainly supported by tax and service revenues, which were able to offset the government’s external debt payment needs and rupiah exchange rate stabilisation measures.

External resilience was also supported by the return of portfolio investment inflows. Foreign ownership of government bonds (SBN) increased from Rp863 trillion in May 2026 to Rp886 trillion in June 2026.

At the same time, the position of SRBI increased from Rp980 trillion to Rp1,073 trillion, with approximately 20 percent held by foreign investors.

According to BI, overall reserve adequacy remains solid, equivalent to financing 5.4 months of imports and government external debt payments, and is above international adequacy standards.