No. 22/26/DKom
As
a follow-up measure to strengthen monetary and financial market stability in
conjunction with the Coordinating Ministry of Economic Affairs, Ministry of
Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance
Corporation (LPS), the Governor of Bank Indonesia, Perry Warjiyo, today (01/04)
delivered the policy mix instituted by Bank Indonesia to strengthen economic
stimuli in accordance with the authority of Bank Indonesia pursuant to
Government Regulation in Lieu of Law (Perpu) No. 1 of 2020 concerning State
Financial and Financial System Stability Policies to Handle the Coronavirus
Disease 2019 (COVID-19) Pandemic and/or Confront the Threat to the National
Economy and/or Financial System Stability signed by President Jokowi as follows:
Commitment
to close coordination as an anticipatory measure to ensure the COVID-19 impact
in Indonesia is rapidly overcome in terms of the human aspect, economy and
financial sector.
Bank
Indonesia reiterated that rupiah exchange rates are currently adequate and the
outlook scenario formulated for the main macroeconomic indicators is a form of
forward-looking anticipatory measure towards prevention through joint efforts,
while Bank Indonesia continues to maintain rupiah stability.
Monetary
and fiscal policy synergy is mitigating the COVID-19 impact and reducing panic
in global financial markets. In terms of
monetary policy, central banks around the world have lowered policy rates,
injected liquidity and alleviated the burden on the economy and financial
sector. In terms of fiscal policy,
various measures have been introduced through fiscal stimuli, including
increasing the healthcare budget, relaxing tax regulations and providing social
assistance.
The
policy mix implemented by Bank Indonesia to mitigate the COVID-19 impact is as
follows:
a. Lower
the BI 7-Day (Reverse) Repo Rate in February and March by 25bps respectively;
b. Intensify
triple intervention policy in the spot and DNDF markets and purchasing SBN in
the secondary market;
c. Reduce
the foreign currency reserve requirements for conventional commercial banks
from 8% to 4%;
d. Extend
the SBN repo tenor and provide daily auctions to loosen rupiah liquidity as
well as increase the frequency of FX Swap auctions to daily in order to ensure
adequate liquidity;
e. Expand
the types of underlying transactions for Domestic Non-Deliverable Forwards
(DNDF), thus increasing hedging alternatives against rupiah holdings in
Indonesia;
f. Lower
the rupiah reserve requirements by 50bps for banks that are engaged in export-import
financing, as well as the financing of MSMEs and other priority sectors;
g. Loosen
the Macroprudential Intermediation Ratio (MIR);
h. Provide
hygienic currency fit for circulation, reduce the costs of the National
Clearing System (SKNBI), maintain a QRIS Merchant Deposit Rate (MDR) of 0% for
micro-merchants, and support non-cash disbursements of various government
programs, including the Family Hope Program (PKH) and Noncash Food Assistance
Program (BPNT), as well as the Pre-Employment Card and College Smart Indonesia
Card.
Bank
Indonesia also backs promulgation of the Government Regulation in Lieu of Law
in order to relax prevailing laws to mitigate the COVID-19 impact as an
anticipatory measure in conjunction with the Government, OJK and LPS. COVID-19 handling requires extraordinary
measures, unconventional policies and policies that exceed previous
jurisdiction.
To
that end, Bank Indonesia has reiterated its authority in accordance with
Government Regulation in Lieu of Law (Perpu) No. 1 of 2020 as follows:
a. Expansion
of BI authority to purchase long-term government securities (SBN) and
government Islamic securities (SBSN) in the primary market in order to assist
the Government finance the handling of the COVID-19 impact on financial system
stability.
SBN
will be purchased in the primary market by Bank Indonesia as a last resort if
the market is unable to fully absorb the SBN issued by the Government. Further provisions will be regulated in
conjunction with the Minister of Finance and the Governor of Bank Indonesia
based on the following considerations: financial market conditions and the
impact on inflation.
b. As
an anticipatory measure, Bank Indonesia will purchase repo securities held by
the Deposit Insurance Corporation (LPS) in order to finance the handling of
solvency issues at systemic and non-systemic banks;
c. Provision
of short-term liquidity loan or short-term liquidity financing facilities in
compliance with sharia principles to systemic and non-systemic banks;
d. Foreign
exchange flow management for residents.
The use of foreign exchange by residents, including provisions for the
surrender, repatriation and conversion of foreign exchange to maintain
macroeconomic and financial system stability as follows:
1) Bank
Indonesia would like to stress that this measure is not a form of foreign
exchange control but policy to manage foreign exchange applicable only to
residents (excluding non-residents/foreign investors). Foreign portfolio investment and foreign
direct investment (FDI) are still required for the Indonesian economy, thus
existing policy permitting the free flow of foreign exchange by foreign
investors remains effective.
2) Regulating
foreign exchange amongst residents is consistent with international prudential
principles for macroeconomic management, particularly under economic distress,
such as the current COVID-19 pandemic.
When
implementing the measures, Bank Indonesia will continue to coordinate with the
Government, OJK and LPS to carefully monitor the dynamics of COVID-19 transmission
and the economic impact on Indonesia over time, including the coordinated
policy measures required to maintain macroeconomic and financial system
stability, while supporting solid and resilient national economic growth.
Jakarta, 1st April 2020
COMMUNICATION DEPARTMENT
Onny Widjanarko
Executive Director
