Monitoring the latest economic conditions in Indonesia, due to the COVID-19 pandemic in particular, the Governor of Bank Indonesia, Perry Warjiyo, delivered five key messages on Thursday (26/03) in relation to the latest developments and policies instituted by Bank Indonesia as follows:

1. The positive impact of the joint measures implemented in advanced economies to overcome the impact of COVID-19 in terms of the human aspect, financial sector and economy.

   1. In fiscal terms, the US Senate and Bundestag have approved the fiscal stimuli requested by the Government. The US Senate has approved a USD2 trillion economic stabilisation package, with USD100 billion allocated to health, USD350 billion for MSMEs, USD250 billion for the labour market and USD500 billion for the business community and social assistance. In Germany, a fiscal stimulus package worth USD860 billion or 10% of GDP has been approved.
   2. In monetary terms, the Federal Reserve has reduced the Fed Funds Rate to near 0%, injected liquidity into the money market and purchased securities. Congruently, the European Central Bank (ECB) has injected liquidity and relaxed policies. The measures are expected to assuage panic in the global markets, thus improving financial indicators, including the stock markets, in response to the policy measures.
      
      
2. Improving sentiment concerning financial markets in Indonesia.

   1. The Rupiah exchange rate has strengthened and is stable. The value of the rupiah strengthened today, trading at around Rp16,250.
   2. The Jakarta Composite Index (JCI) traded up.
   3. Foreign capital flows, foreign investors have begun to purchase securities in the secondary market and the net outflow position has decreased.
      
      
3. BI continues to implement measures to strengthen monetary and financial market stability in conjunction with the Government and Indonesian Financial Services Authority (OJK).
   To strengthen coordination and the various policy measures previously implemented, Bank Indonesia has instituted several follow-up policy measures to maintain monetary and financial market stability, including mitigating the risk of COVID-19, as follows:

   1. Relaxing the regulations for foreign investors concerning hedging and net open position (NOP).
      • Use of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, effective 19th March 2020;
      • Recording DNDF transactions in the NOP, where the DNDF transactions are recorded in the NOP of the bank and reported to Bank Indonesia. This will provide greater flexibility in terms of foreign exchange market transactions, effective 20th March 2020.
   2. Reaffirm that global investors can utilise global and domestic custodian banks to conduct investment activity in Indonesia.
   3. In conjunction with the Ministry of Finance, Bank Indonesia has communicated directly with global investors, who expressed their appreciation for the measures taken by the Government and Bank Indonesia to manage the economy, thus maintaining confidence in Indonesia's economic and financial conditions.
      
      
4. Together with the other relevant authorities, Bank Indonesia is firmly committed to maintaining the availability of payment system and financial services underpinning various economic activities.

   1. Supporting the vigorous efforts of the Government to mitigate COVID-19 transmission, Bank Indonesia has coordinated with the Indonesian Financial Services Authority (OJK) and relevant industries to adjust the schedule of operating activities and public services, effective from 30th March to 29th May 2020.
   2. From a cash perspective, Bank Indonesia is ensuring that rupiah currency in circulation has undergone special hygienic treatment to minimise COVID-19 transmission. In conjunction with the banking industry, Bank Indonesia is meeting the demand for cash through frontloading. It is important to note that adequate cash is available, equivalent to six months of money supply.
   3. From a non-cash perspective, Bank Indonesia and the industry are promoting non-cash transactions through electronic money, mobile banking, internet banking and QRIS, thus supporting the Work From Home (WFH) and Social Distancing initiatives. In addition, Bank Indonesia has extended the 0% Merchant Discount Rate (MDR) on QRIS, specifically micro business, transactions until 30th September 2020 and encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) effective from 1st April 2020 until 31st December 2020. Bank Indonesia will continue to promote non-cash payment instruments and support government programs to disburse social assistance funds through non-cash payments.
      
      
5. Current conditions are different to the Global Financial Crisis of 2008 and the Asian Monetary Crisis of 1998.
   The conditions currently unfolding around the world have stemmed from the human aspect due to the COVID-19 pandemic, which has subsequently spilled over into the global economy and finance. A rapid response to overcoming the COVID-19 pandemic will minimise the impact on the economy and finance. Furthermore, the exchange-rate pass-through impact of rupiah depreciation on inflation is minimal and inflation remains under control due to: i) adequate supply; ii) negative output gap; iii) solid monetary policy credibility to ensure price stability and attainment of the inflation target, including through coordination with the National Inflation Task Force (TPI) and Regional Inflation Task Forces (TPID); and iv) temporary rupiah depreciation caused by global panic.

Bank Indonesia will continue to coordinate closely with the Financial System Stability Committee, including strengthening the Crisis Management Protocol. Furthermore, the authorities will continue to bolster coordination by carefully monitoring the dynamics of COVID-19 transmission and its impact on Indonesia over time, as well as the coordinated follow-up policies required to maintain macroeconomic and financial system stability, while preserving resilient economic growth momentum.