Thursday, November 25, 2010

Forex Reserves Strong In Facing Capital Outflow: BI

Thursday, November 25, 2010

Jakarta, Bank Indonesia (BI/the central bank) said the country`s foreign exchange (forex) reserves which at present stood at US$91.8 billion could reduce risks of sudden foreign capital outflow.

"The amount of the country`s forex reserves has unexpectedly reached US$91 billion, exceeding that of last year which stood at US$66 billion, and this provides confidence for the monetary authorities in the face of possible sudden reversal to the capital inflow," BI Deputy Governor Budi Mulya said.

He said that BI and the government would do their best to optimize the benefit of foreign capital inflow because it would provide efficiency for manufacturing industry and investment activities.

"Inflow generates declining yields in stocks and loans markets. If this happens, its borrowing costs would go down so that incentives for business financing and investment activities would increase because funding cost would also go down," he said.

For a monetary authority like BI, with the application of a precise policy, foreign capital inflow would help keep inflation at a controllable level and make the rupiah`s appreciation value more competitive than those of other Asean countries` currencies.

"The capital inflow will strengthen expectation regarding inflation and it would provide positive contribution. We see that the capital inflow would not disturb competitiveness because our competitor countries also experience the same thing. If we calculate the level of rupiah appreciation, it would not be the same as that of other countries," he said.

He expressed hope that investment of capital inflow in state bonds or in stocks market would provide positive impact on the real sector, not merely parked for the time being in the money market.

"We hope these funds would later be invested in real markets such as in the foreign capital investment (PMA) projects, after all, realization in 2010 seems to be far higher than that in 2009," he added.


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blogging said...

Thanks For Visiting

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