Bolstering Indonesia's Foreign Exchange Reserves
Many central banks around the world are now diversifying their reserve portfolios by incorporating a range of high‑quality financial instruments to raise yields without sacrificing safety.
Jakarta (ANTARA) - In an increasingly uncertain global economy, foreign exchange reserves have become one of the most important indicators of a country’s economic resilience.
Forex reserves function as a ‘shield’ protecting exchange rate stability, maintaining investor confidence, and providing liquidity when balance of payments come under pressure.
Experience from various financial crises has shown that countries with strong forex reserves are better able to weather global shocks than those with limited reserves. Therefore, strengthening forex reserves is not merely a monetary policy; it is a fundamental strategy to maintain national economic stability.
In the Indonesian context, forex reserves are actually relatively strong compared with many other developing countries. Bank Indonesia notes that Indonesia’s forex reserves at the beginning of 2026 were around $151–155 billion, slightly down from late 2025 due to government external debt payments and rupiah stability interventions.
Nevertheless, the figure is still sufficient to finance around six months of imports, or more than twice the international adequacy standard of about three months’ imports.
That three-month import standard is commonly used by international institutions such as the IMF as a minimum safety threshold. In other words, if a country can cover imports for three months with its forex reserves, it is considered to have a basic buffer to face a balance of payments crisis.
Indonesia, with reserves of around six months of imports, therefore has a relatively good stability buffer. Yet a more important question is: is this level already ideal to face the increasing global uncertainty?
To answer this question, we need to compare with other countries. East Asian countries are known for their very large forex reserves as a lesson from the 1997–1998 Asian financial crisis. For example, China has more than $3 trillion in forex reserves, the largest in the world. Japan holds more than $1 trillion, while South Korea has around $400 billion of forex reserves. These countries have intentionally built large reserves to ensure currency stability and protect their domestic economies from volatility in global capital flows.
Even other developing Asian countries likewise hold substantial reserves relative to the size of their economies. India has more than $600 billion in forex reserves, while Thailand holds more than $200 billion. Their strategy is largely similar: to build large forex reserves as macroeconomic insurance against global crises.
Compared with those countries, Indonesia’s forex reserves do appear smaller in nominal terms. However, a more appropriate comparison is with the size of the economy or the import value. With an economy of around $1.4 trillion, Indonesia’s forex reserves amount to about 10–11 percent of GDP. This ratio is actually quite healthy, but still lower than several Asian countries that reach 20–30 percent of GDP.
From the perspective of external stability, many economists contend that developing countries ideally should have forex reserves able to cover 6 to 9 months of imports, particularly for economies with commodity export structures that are volatile.
Indonesia is currently in the range of six months of imports, thus technically meeting the precautionary standard. However, to face ever higher global volatility, gradually increasing forex reserves remains a prudent strategy.
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