BI 7-Day Reverse Repo Rate Held at 4.00%: Synergy to Accelerate National Economic Recovery - Bank Sentral Republik Indonesia
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October 27, 2020

No. 22/75/DKom

The BI Board of Governors agreed on 12th and 13th October 2020 to hold the BI 7-Day Reverse Repo Rate at 4.00%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.25% and 4.75%.The decision is consistent with the need to maintain rupiah exchange rate stability against a backdrop of projected low inflation. Bank Indonesia is focusing on the quantity channel by providing liquidity, including support for the Government in terms of accelerating state budget realisation in 2020 to hasten the economic recovery from COVID-19. In addition, Bank Indonesia is implementing the following measures:

  1. Maintaining rupiah exchange rate stabilisation policy in line with the currency's fundamental value and market mechanisms;
  2. Strengthening the monetary operations strategy in order to reinforce the accommodative monetary policy stance;
  3. Accelerating money market and foreign exchange market deepening through infrastructure development, including Electronic Trading Platforms (ETP) as well as a Central Counterparty (CCP);
  4. Strengthening policy implementation to stimulate SMEs through corporatisation, increasing capacity, access to finance as well as digitalisation in line with the National Made in Indonesia Movement (Gernas BBI); and
  5. Strengthening the digital economy and finance ecosystem through the use of digital payment instruments as well as collaboration between the banking industry, FinTech and e-commerce to support the national economic recovery program;


Bank Indonesia will continue to implement the follow-up policy measures required to support the national economic recovery program by carefully observing global economic and financial market dynamics as well as COVID-19 transmission and the impact on the economic outlook of Indonesia over time. Close policy coordination with the Government and Financial System Stability Committee will constantly be strengthening order to maintain macroeconomic and financial system stability, while accelerating the national economic recovery.

The global economic recovery is proceeding as expected.  Global economic growth momentum is rebounding on the back of extraordinary fiscal stimuli introduced in several advanced economies, particularly the United States. The recent gains have been boosted by economic recovery in China in response to large fiscal stimuli and a flattening of the COVID-19 curve, which have increased investment in the manufacturing industry amidst more muted economic performance in other developing economies. The global economic recovery prompted increases in several early indicators in September 2020, including public mobility, the Purchasing Managers Index (PMI) for manufacturing and services as well as consumer confidence in the United States and European Union. Moving forward, the global economic recovery will be influenced by lower COVID-19 transmission rates, increasing public mobility and ongoing policy stimuli. Furthermore, the global economic recovery will increase world trade volume and international commodity prices in line with previous projections. Meanwhile, global financial market uncertainty remains elevated in response to geopolitical issues, such as the US election and Brexit negotiations, coupled with trade tensions between the United States and China. Such dynamics will impede capital flows to developing economies and restrain currency appreciation in a number of countries, including Indonesia.

The domestic economy is also recovering gradually, primarily driven by fiscal stimuli and stronger exports.  Developments in August-September 2020 revealed higher government spending given the fiscal stimuli relating to social protections and SME support. Export performance has exceeded previous projections on the back of persistent global demand, primarily from the United States and China, for several commodities from Indonesia, mainly iron and steel, pulp and waste paper as well as textiles and textile products. Regionally, several regions outside Java have contributed to stronger exports, including Sumatra, Bali-Nusa Tenggara and Sulawesi-Maluku-Papua. Fiscal stimuli and higher exports along with solid building investment in current national strategic projects have bolstered the economic recovery despite subdued household consumption. Domestic economic gains in Indonesia are reflected in a number of early indicators, including retail and online sales, job vacancies as well as private income. The national economic recovery is expected to endure on global economic gains, increasing central and local government budget realisation, progress in the loan restructuring program as well as ongoing monetary and macroprudential stimuli by Bank Indonesia. Through its policy mix, Bank Indonesia will continue to strengthen synergy with the Government and other relevant authorities to ensure the various policies taken are effective in stimulating the economic recovery.

External sector resilience was maintained in the third quarter of 2020 despite a rebalancing of foreign capital flows.  The current account is expected to record a surplus in the third quarter of 2020, stemming from stronger exports and weaker imports on compressed domestic demand. That projection has been reinforced by a relatively large trade surplus compared with conditions in the previous period. In July-August 2020, the trade balance recorded a USD5.57 billion surplus. Based on the potential current account surplus and the financial account surplus, the overall balance of payments is expected to record a surplus in the third quarter of 2020 despite a net outflow of foreign portfolio investment totalling USD1.24 billion. At the beginning of October 2020, foreign capital inflows were gradually returning to domestic financial markets, with a net inflow of USD0.33 billion recorded on 9th October 2020. Meanwhile, the position of reserve assets at the end of September 2020 remained high at USD135.2 billion, equivalent to 9.5 months of imports or 9.1 months of imports and servicing government external debt, which is well above the international adequacy standard of around three months. Bank Indonesia projects the current account to run a low deficit in 2020, below 1.5% of GDP, thus reinforcing external sector resilience.

Consistent with Bank Indonesia's stabilisation measures, rupiah exchange rates have remained relatively under control. In September 2020, the rupiah depreciated 2.13% (ptp) in response to elevated financial market uncertainty stemming from global and domestic factors. As of 12th October 2020, the rupiah gained 1.22% (ptp) or 0.34% on the average compare with level recorded in September 2020 as foreign capital inflows to domestic financial markets were maintained in line with increasing global liquidity and maintained investor confidence in the domestic economic outlook. As of 12th October 2020, therefore, the rupiah had lost around 5.56% of its value compared with the level recorded at the end of 2019. Moving forward, Bank Indonesia expects the rupiah to regain lost value as the currency is still fundamentally undervalued, supported by low and stable inflation, highly attractive domestic financial assets for investment, a lower risk premium in Indonesia and abundant global liquidity. Bank Indonesia will continue to strengthen exchange rate stabilisation policy in line with the rupiah's fundamental value and market mechanisms through effective monetary operations and by providing market liquidity.

Inflation remains low on weak domestic demand and adequate supply. In September 2020, the Consumer Price Index (CPI) recorded 0.05% (mtm) deflation, thus bringing CPI inflation for the year to 0.89% (ytd) or 1.42% (yoy) annually, up from 1.32% (yoy) in August 2020. Low headline inflation is a corollary of decreasing core inflation in line with weak domestic demand as well as policy consistency by Bank Indonesia to anchor inflation expectations to the target corridor and maintain exchange rate stability. Food price corrections due to limited domestic demand, adequate supply during the harvesting season, maintained distribution and low international food commodity prices have led to mild inflationary pressures on volatile foods. In addition, lower airfares have fed through to lower administered prices inflation. Bank Indonesia projects inflation in 2020 below the lower bound of the target corridor before returning to the 3.0%±1% target range in 2021. Furthermore, Bank Indonesia consistently maintains price stability and strengthens policy coordination with the central and local government to control inflation within the predetermined target.

In line with Bank Indonesia's accommodative monetary and macroprudential policy stance, liquidity conditions remain loose, prompting lower interest rates and stimulating economic financing. As of 9th October 2020, Bank Indonesia had injected around Rp667.6 trillion of additional liquidity through quantitative easing into the banking system, primarily in the form of lower reserve requirements totalling Rp155 trillion and monetary expansion totalling Rp496.8 trillion. Loose liquidity conditions edged up the ratio of liquid assets to deposits in September 2020 to 31.23%, coupled with a low overnight interbank rate of 3.29% in the reporting period. Policies to loosen liquidity and reduce the BI 7-Day (Reverse) Repo Rate have effectively lowered deposit and lending rates from 5.49% and 9.92% in August 2020 to 5.18% and 9.88% in September 2020. Furthermore, the benchmark 10-year SBN yield decreased from 6.93% at the end of September 2020 to 6.87% as of 12th October 2020. In terms of monetary aggregates, M1 and M2 growth remained high in September 2020 at 17.6% (yoy) and 12.3% (yoy) respectively. Moving forward, monetary expansion by Bank Indonesia together with faster budget realisation and bank loan restructuring are expected to stimulate lending for the national economic recovery.

Bank Indonesia will strengthen monetary expansion synergy with fiscal stimuli by the Government in order to stimulate national economic recovery momentum. Bank Indonesia continues its commitment to funding the 2020 state budget through SBN purchases in the primary market in accordance with Act No. 2 of 2020, through market mechanisms and private placement, as part of the efforts to accelerate the national economic recovery program, while maintaining macroeconomic stability. As of 8th October 2020, Bank Indonesia had purchased Rp60.18 trillion worth of SBN in the primary market through market mechanisms pursuant to the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 16th April 2020, including auction schemes, greenshoe options (GSO) and private placement. Meanwhile, funding realisation and burden sharing to fund public goods in the state budget by Bank Indonesia through private placement in accordance with the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020 currently stand at Rp229.68 trillion. In addition, Bank Indonesia has also realised burden sharing with the Government to fund non-public goods-SME totalling 90.88 trillion pursuant to the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020. Through such synergy, the Government can focus on accelerating state budget realisation in order to stimulate the national economic recovery.

Financial system stability remains solid, although the risks associated with COVID-19 transmission on financial system stability continue to demand vigilance.  The Capital Adequacy Ratio (CAR) remained high in August 2020 at 23.39%, accompanied by low NPL ratios of 3.22% (gross) and 1.14% (nett). Notwithstanding, the intermediation function of the financial sector remains weak due to subdued loan growth in line with compressed domestic demand and a cautious banking industry. Growth of outstanding loans disbursed by the banking industry decelerated to 0.12% (yoy) in September 2020 from 1.04% (yoy) in August 2020. In contrast, deposit growth accelerated from 11.64% (yoy) in August 2020 to 12.88% (yoy) on the back of fiscal expansion. Moving forward, the bank intermediation function is expected to improve in line with the promising corporate outlook and domestic economic recovery as well as consistent policy synergy. Corporate performance gradually improved in the third quarter of 2020, as confirmed by increasing sales, repayment capacity and tax revenues, primarily from the manufacturing industry and trade. In addition, the bank loan restructuring program is continuing, including SMEs that account for 36% of total credit, supported by increasing liquidity. Bank Indonesia will continue to strengthen coordination between its macroprudential policy, the government's fiscal policy, OJK’s microprudential policy and LPS’ deposit guarantee policy in order to strengthen financial system stability and stimulate lending for the national economic recovery.

Cash and non-cash payment system transactions are increasing in line with the economic recovery, accompanied by rapid economic and financial digitalisation.  Growth of currency in circulation increased from 5.82% (yoy) in August 2020 to 7.2% (yoy) in September 2020, reaching Rp762.1 trillion. Similarly, transaction value using ATM/debit cards, credit cards and electronic money recorded a shallower 6.86% (yoy) contraction in August 2020 compared with 13.94% (yoy) contraction in July 2020. On the other hand, digital economy and finance transactions are proliferating rapidly in line with greater use of digital platforms and instruments during the pandemic, together with a shift in public preference and greater public acceptance of digital transactions. Growth of transaction value using electronic money accelerated to 33.80% (yoy) in August 2020 from 24.42% (yoy) one month earlier. In terms of digital banking, transaction volume growth increased to 52.69% (yoy) in August 2020 from 38.81% (yoy) the month earlier. Moving forward, Bank Indonesia will continue to accelerate payment digitalisation and expand the digital ecosystem through collaboration with the Government, banking industry, FinTech and e-commerce to expedite the national economic recovery, particularly in terms of the government's social aid program, SME lending and digitalisation as well as the National Made in Indonesia Movement (Gernas BBI). In addition, Bank Indonesia will continue several initiatives, including expansion of the QRIS ecosystem, utilisation of big data and application programming interface (API) as well as strengthening fraud and cyber oversight in terms of digital payments.

Head of Communication Department
Onny Widjanarko
Executive Director 

Information on Bank Indonesia
Tel. 021-131, email:


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