It’s a Central Bank’s Role to Maintain Official Reserve Assets.

Value of the Indonesian Rupiah and the stability of the country's financial system are backed by Bank Indonesia's by holding of official reserve assets. Official reserve assets include foreign cash, gold, and other financial assets.

There are some of the ways that Bank Indonesia maintains official reserve assets, firstly foreign exchange operations, in this practice Bank Indonesia buys and sells foreign currencies in the foreign exchange market to manage the supply and demand of foreign currencies and stabilize the value of the rupiah. Through foreign exchange operations, Bank Indonesia can increase or decrease the country's foreign currency reserves. Secondly, Bank Indonesia also holds gold reserves as a part of its official reserves. Gold is considered a safe-haven asset and can provide stability to the financial system in times of economic uncertainty. And the last is by management of sovereign wealth funds, as we know Bank Indonesia manages several sovereign wealth funds on behalf of the Indonesian government. These funds are invested in various financial instruments to generate returns and increase the country's official reserves.

As Bank Indonesia statement in official reserve assets statement (2023) in this February, there are more than USD1 million gain for this month if compared to January. This increment cause by local tax payment, improvement of export activity, and also payment from foreign loan. Bank Indonesia believe that official reserve asset is a good indicator for financial stability and macroeconomic condition of domestic economic.

Overall, Bank Indonesia maintains Indonesia reserve assets to support the stability of the financial system and the value of Rupiah. By managing the supply and demand of foreign currencies, holding gold reserves, and investing in financial instruments, Bank Indonesia can ensure that Indonesia has sufficient official reserves to meet its international obligations and support economic growth.

Reference:

Bank Indonesia (2023) OFFICIAL RESERVE ASSETS FEBRUARY 2023 INCREASED, Official Reserve Assets February 2023 Increased. Available at: https://www.bi.go.id/en/publikasi/ruang-media/news-release/Pages/sp_255623.aspx (Accessed: March 12, 2023).