Latest Developments and BI Measures against COVID-19 (2nd April 2020) - Bank Sentral Republik Indonesia
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September 29, 2020
Monitoring the latest economic conditions in Indonesia, the impact of COVID-19 in particular, Bank Indonesia Governor, Perry Warjiyo, announced three new developments on Thursday (02/04) along with the policy measures instituted under the authority of Bank Indonesia, specifically in relation to promulgation of Government Regulation in Lieu of Law (Perpu) No. 1 of 2020, as follows:
1.      Rupiah exchange rate currently stable
Seeking to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms, Bank Indonesia has strengthened the intensity of triple intervention policy in the spot and DNDF markets, while continuing to purchase SBN in the secondary market.  Bank Indonesia is confident that the rupiah exchange rate is stable and will strengthen to a level of Rp15,000/USD by the end of the year.  Through coordination with the Government, Bank Indonesia is also confident that economic growth will not fall below 2.3% in 2020.
Bank Indonesia has reiterated that the macro indicators delivered at the economic stimulus press conference represent a what-if scenario and not projected readings.  The what-if scenario has been simulated so that it can be prevented and anticipated through coordinated efforts between the Government, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS).
 
2.      SBN purchases by Bank Indonesia in the primary market as a last resort
Bank Indonesia has emphasised that expanding the jurisdiction of Bank Indonesia to purchase long-term SBN, SUN/SBSN in the primary market in order to assist the Government manage the impact of COVID-19 on financial system stability is regulated pursuant to Government Regulation in Lieu of Law (Perpu) No. 1 of 2020 as a last resort, not a bail-out or BLBI.
Bank Indonesia's role as last resort is to purchase SBN in the primary market if market capacity is unable to absorb all SBN issued by the government (due to high and irrational yields, amongst others).
Bank Indonesia supports promulgation of Perpu under extraordinary circumstances due to the COVID-19 pandemic, thus requiring extraordinary measures to relax existing legislation (by issuing a Perpu) in order to mitigate the impact of COVID-19 as the legal basis of joint anticipatory measures with the Government, OJK and LPS.
 
3.      Bank Indonesia has also emphasised that legislation to manage the flow of foreign exchange for Indonesian residents as contained in Perpu No. 1 of 2020 is not a foreign exchange control and there are currently no plans to issue policy requiring foreign exchange proceeds from exports to be converted into rupiah by residents.  Bank Indonesia would like to convey the following points:
1)     Bank Indonesia would like to stress that this is not a foreign exchange control but policy to manage foreign exchange applicable only to Residents (excluding non-residents/foreign investors).  Foreign portfolio investment (stocks and bonds) 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)     Foreign exchange management for Residents could require the conversion of foreign exchange proceeds from exports into rupiah, yet there are currently no plans to introduce such measures.  Existing regulations remain in place for exporters and importers.  Foreign exchange management is required to support macroeconomic and financial system stability, including rupiah exchange rate stability.
3)     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.
 
Bank Indonesia will continue to coordinate with the Government, OJK and LPS to carefully monitor the dynamics of the COVID-19 pandemic and the economic impact on Indonesia over time, including the coordinated policy measures required to maintain macroeconomic and financial system stability, while supporting sustainable and resilient economic growth in Indonesia.
 
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