TO INCREASE FOREX RESERVES

Over the past half year, the course or Rupiah value against USD has been unimpressive. At early year Rupiah value was around Rp9, 635. So far Rupiah had been constantly under pressure and was in the range of Rp9, 950 per USD. There were many reasons why Rupiah was depreciated: Domestic pressure and global pressures.

               

Under the circumstances, smartly and constantly guarded Rupiah in the market so pressures on Rupiah could be controlled. What made pressures on Rupiah stronger was on delivery forward [NDF] of Rupiah at the Singapore moneymarket which offered exchanged rate of Rp10, 050 per USD and ignited quite a shock at the Jakarta moneymarket.

               

The result was that Rupiah was traded at Rp10, 015 per USD before bouncing up again to Rp9, 950 per USD when BI made intervention and there was surely price for it which eroded national forex reserves.

               

On the other hand, the Government was playing the great role of protecting Rupiah from pressures. For example, the government needed to watch on the national debt-to-forex-reserves ratio.

               

The government needed to watch on the condition where overseas loan would be necessary for covering up swelling deficit amidst lessened forex serves. It was just Government’s overseas debt which must be watched on but also debt of the private sector as they both affected forex reserves.

               

The debt service ratio had been showing up going trend since 2011 sfter showing Dept showed that since 2009 to 7.4% in 2011. However, since 2012 the ratio increased to 7.9%. by 2013, the ratio was projected at 8.7%.

               

As known, the risk of swollen deficit of APBN 2013 State Budget forced the Government to increase overseas debt, through SBN Promissory Notes or through credit program. Meanwhile forex reserves up to end of May 2013 tend to decline, i.e. USD 112.8 billion by December 2012 to be around USD 105 billion by end of May 2013.

               

And yet by April 2013 last Forex reserves tend to increase, by support of USD based global bonds which entered BI by the Government of RI. The Government managed to draw global bonds worth USD 3 billions at the international market on April 8, 2013 last in that auction total offer that entered came to USD 12.5 billion oil over-subscribed by 4.2 times.

               

Today the high need for foreign currency for import financing was rated as the cause of reduced forex reserves in May 2013. The need for import financing, especially import of oil and gas, was higher that the need for monetary intervention by BI which reduced forex reserves in May 2013.

               

So apparently reduced forex reserves was more due to deficit in balance of payment due to export slowdown and high import expenses, particularly oil and gas.

               

While being used for stabilizing Rupiah, reduced forex reserves was also because of Pertamina using USD for financing import of oil. As known, forex reserves per May 2013 slumped against the position in end of April 2013. A Forex reserve by end of May 2013 was around USD 105 billion while the position in April 2013 was USD 107.3 billion.

                 

The disheartening fact was that Indonesia’ performance in international trading also signaled betterment of export. Indonesia’s export of May 2013 was showing increase of 8.90% i.e. USD 16,074.0 million against USD 14,760 million in April 2013. Compared to May 2012 Indonesia’s export showed downturn of 4.49%.

               

Increase of export in May 2013 was thanks to increased export of oil-gas by 17.00%, i.e. USD 2,452 million to become USD 2,868.7 million; the same was with export of non oil gas which increased by 7.28% from 12,308.9 million to become USD 13,205.3 million.

               

Furthermore increase of oil gas export was due increased export of crude oil by 37.7% to become USD 1,068 million and export of oil products by 22.99% to become USD 358.2 million; the same was wirth export of gas which increase by 4.10% to become USD 1,441.8 million. Export volume of oil-gas by May 2013 against April 2013 for crude oil and oil products increased by 41.19% and 25.23% respectively; the same was with gas which increased by 0.73%.

               

Meanwhile price of Indonesian crude oil in the world market dropped from USD 100.19 per barrel in April 2013 to become USD 99.01 per USD by May 2013. The highest increase of non oil-gas export in May 2013 against April 2013 happened in fat and vegetable oil [HS15] amounting to USD 311.9 million while the biggest downturn was in iron and steel products [HS73] amounting to USD 25.1 million.

               

Other commodities which also posted increase in export was mineral fuel [HS27] amounting to USD 118.9 million; machines and mechanical instruments [HS84] amounting to USD 43.8 million; machines and electrical instruments [HGS85] amounting to USD 16.1 million and iron ore and crust and metal dust [HS26] amounting to USD 8.8 million.

               

Other commodities which posted downturn beside iron and steel [HS73] were vehicles and parts [HS87] amounting to USD 24.9 million; rubber and rubber products [HS26]; copper [HS74] amounting to USD 5.7 million and organic chemical materials [HS29] amounting to USD 1.7 million.

               

Through January-May 2013 export of 10 categories of goods [HS 2 digits] above contributed 58.77% to total non oil-gas export. In terms of growth, export of the said 10 categories products dropped by 6.47% against same period in 2012. Meanwhile the role of non oil-gas export beyond the 10 category products in January-May 2013 was 41.23%.

               

Export of non oil-gas products in May 2013 to China, Japan, and India came to USD 1,719 million, USD 1,440.5 million and USD 1,312.4 million respectively; combined role of the three came to 33.94%.

               

Export increase of non oil-gas commodities in May 2013 against April 2013 was to some main destination countries, i.e. India USD 155.6 million, Japan 143.8 million; USA USD 99.5 million; South Korea USD 96.7 million; Malaysia USD 74.8 million; Taiwan 54.9 million; Thailand USD 26.8 million; England 10.01 million; France USD 6.2 million.

On the country export to Australia was showing downturn USD 68.2 million; followed by China USD 20.0 million; Singapore USD 15.5 million; Germany USD 1.2 million; meanwhile export to Uni Europe [27 countries] in May 2013 was posted at USD 1,440.9 million. In the whole, total export to 17 main destination countries increased by 6.40%.

In this semester 2 officials believed that export would increase, in line with bettered condition of some of Indonesia’s trading counterparts, among others: the USA, Japan and China. Indonesia’s Trade Balance would predictably be better in this Semester Two as the world’s economy was changing for the better.         

On the other hand, BI had been trying to secure forex reserves through various policies, among others the policy on Export-based Forex [DHE]. By this policy, it was mandatory for national exporters to park their money in domestic banks. So far nearly 90% of exporters had complied to the regulation which had been supportive to the effort of strengthening national forex reserves and keep it above USD 100 billion. (SS)

Business News - July 05,2013