The Indonesian rupiah has remained under pressure, once again this month on rising prospects of a rate hike by the Federal Reserve in June. However, certain similarities were observed in rupiah’s movement this month and during the summer of 2013, when the IDR was pressurized by fears of sudden capital outflows.

2013 saw a depreciating IDR, on the backdrop of excess outflow of sudden capital from the economy due to Indonesia’s low foreign reserves-external debt ratio as well as a surge in its current account deficit.

Following Bank Indonesia’s (BI) regulation on non-bank corporate’ external debt issuance, the growth of external debt has slowed significantly. Indeed, for the first time in more than a decade, the growth of total private sector external debt as well as private sector short-term debt has gone red in 1Q16. As of Mar 2016, total short-term external debt totaled USD 38.1billionn, lowest since early-2012. And foreign reserves coverage of short-term external debt rose 2.7 times, highest since Mar 2012, DBS reported.

“No surprise that BI remains cautious and we reckon that foreign reserve accumulation continues to be a priority going forward,” DBS said in its research report.

Meanwhile, there has been some improvement in the country’s macroeconomic risk profile since 2013. However, Indonesia’s foreign reserves coverage of its short-term external debt is still among the lowest.