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4/1/2020 12:00 AM
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Bank Indonesia Policy Mix Economic Stimulus: Mitigating COVID-19 Impact

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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
Onny Widjanarko
Executive Director

​​​​Contact Center BICARA : 1500-131 e-mail :
Working hours: Monday to Friday, 08.00-16.00 West Indonesia Time
Halaman ini terakhir diperbarui 9/21/2020 10:08 PM
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