Posted April 04, 2020 16:29:22For more than two decades, Indonesia has been an exporter of commodities, mainly oil and gas.
It has been in the forefront of a massive currency devaluation campaign to boost its exports.
The currency has plunged from about US$5.00 to US$1.50 per euro and more recently to US$,1.25 to US$.1.30 per euro.
The depreciation has prompted a sharp decline in imports of foreign exchange and foreign currency, and in some cases, has caused a sharp rise in domestic savings.
The government has blamed the devaluation on its foreign exchange policy, and has been calling for a re-evaluation of the Indonesian currency.
It says it has been the main cause of the currency’s decline.
But economists say that the currency crisis has been caused in large part by the country’s high foreign exchange reserves.
To boost exports, the government has set up a foreign exchange fund that has been largely run by banks.
In exchange for a currency that is more stable, the foreign exchange reserve has fallen from US$2.5 trillion in 2016 to US.$1.2 trillion in 2018, according to data from the Bank of Indonesia.
The fund is expected to close on March 27.
But the government says it will only invest US$500 million of its foreign currency reserves at the end of this month.
The Indonesian foreign exchange rate is also expected to fall to around US$0.8 per euro in the coming days, according a report from Nomura Securities.
The central bank is now holding a foreign currency reserve at US$6.5 billion.
Analysts say the currency has had a big effect on the economy, with exports to Asia’s second-largest economy down by nearly 40 percent from a year earlier.
It’s been the most damaging blow to the country, which relies on oil and other natural resources for much of its economy, and is seen as a major market for Chinese investment.