BI Joins Hands with Finance Ministry, OJK to Stimulate Economic Recovery
Date 4 Juni 2020
In a bid to stimulate the country’s economic recovery, Indonesian central bank Bank Indonesia (BI) has announced it is coordinating and working in synergy with Ministry of Finance and the Financial Services Authority (OJK).
According to BI Governor Perry Warjiyo, one of the measures is by establishing policies aimed at supporting the sustainability and the process of economic recovery.
“We are introducing measures to stabilize the economy, particularly in the financial markets both in the foreign exchange market and the capital market, including the sovereign debt papers (SBN) market,” Perry said in a press statement, Wednesday (3/6).
Through close coordination, Perry continued, the Rupiah exchange rate now stands at Rp14,200 from Rp16,400 in early April and there is still opportunity for a more robust exchange rate as a result of the stability and confidence of the market, domestic and foreign investors.
Inflation was also low at 2.91% owing to coordination between the Government, the Central Bank at the central and regional levels, and the SBN which was once above 8% also had dropped to 7.2%, he added.
“Likewise, we continue to increase the country’s foreign exchange reserves this month. The foreign exchange reserves as of last month will be announced on 8 June,” he said.
Bank Indonesia, Perry added, is also fully committed to properly implementing the State Budget, particularly in terms of funding sourced from the State Budget.
Citing report from Minister of Finance Sri Mulyani, Perry said that Ministry of Finance and Bank Indonesia have also drawn up a joint agreement on how BI had purchased the SBN from the Primary Market signed on 16 April 2020.
Bank Indonesia since then has participated in the Prime Market auction, both as a non-competitive bidder, greenshoe option (GSO), and private placement, and purchased the SBN worth around Rp26 trillion, he said.
With greater investor confidence, more foreign investors have purchased the SBN at the initial auction, he said, adding that coordination between Ministry of Finance and Bank Indonesia for the State Budget funding has also increasingly fostered confidence from the market and eased the burden of the SBN.
Bank Indonesia, according to Perry, is also ready not only to absorb the SBN issued on the Primary Market, provided that the market is inadequate for commitments so that funding from the State Budget can run; therefore, it can provide economic stimulus, and also support further economic recovery.
Bank Indonesia also supports economic recovery programs through the restructuring of business and credit sectors, he said.
“Liquidity funding for the restructuring of business and credit sectors is in accordance with Government Regulation Number 23 of 2020,” he said, adding that Bank Indonesia’s duty to provide liquidity funds to banks is expected to support the success of credit restructuring program as part of the Government’s economic recovery programs.
On the occasion, BI Governor also noted that the banks as a whole have the SBN totaling around Rp880 trillion, a total of Rp520 trillion of which was repurchased to Bank Indonesia to finance the restructuring of business and credit sectors before requiring the placement of funds from the Government.
As a follow-up to the decision of Board of Governors’ Meeting (RDG) last month, Bank Indonesia will also provide current account services for the statutory reserves from banks at Bank Indonesia – which currently have no interest rates – with an interest rate of 1.5%.
“We will also provide 1.5% current account services for the minimum statutory reserves to all banks,” the Governor said. (FID/EN)
Reviewed by: M. Ersan Pamungkas