Indonesian government looking to sell Samurai and Eurobonds in the second semester (2H) of 2020 to fund the fiscal deficit, said finance ministry' official on Thursday (06/04) - Photo by ING

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) has poured Rp130 trillion (US$9.29 billion) to stabilized the government bond market since the beginning of this year, said the governor as quoted by local media on Thursday (03/12). The intervention has been taken after foreigners released their portfolio in the secondary market.

We are committed to remaining in the market to stabilize the Rupiah by selling (US) Dollars through cash or through domestic non-deliverables forwards,” said the governor Perry Warjiyo by adding around Rp 10 trillion spent since the spread of the coronavirus in late January.

In the first session, major Asian currencies are weakening against the US Dollar. The Rupiah is the second worst after the South Korean won which dropped 0.99 percent to 14,480 agains the Greenback. Only the Japanese yen rose sharply more than 1 percent and the Taiwan dollar rose 0.12 percent. While, the Jakarta Composite Index parked at 5,002.56 after down2.94 percent at the end of session one compared to previous day.

Based on the central bank data, until March 9, a total of Rp51 trillion has flew from the bond market and Rp8 trillion was from the stock market. He added, almost all types of investors are also trying to release the assets of all emerging markets including Indonesia.

On March 2, the Bank has injected liquidity of $3.2 billion to local bank through various policies to help the economy and to reduce the sell-off on the financial market. According to Warjiyo, the central bank has announced five steps to give more liquidity to the market.

First, the central bank ready to conduct intervention on a larger scale in the Domestic Non-Deliverable Forward market, the spot market, and the government bond market. Second, lowering the statutory reserve requirements for conventional and Islamic commercial banks’ foreign exchange reserves from 8 percent to 4 percent starting March 16.

Third, reduce the reserve requirement of export-import financing by 50 basis points starting early April. Fourth, expand the underlying types for foreign investors so that they can provide a hedging alternative to Rupiah ownership. And fifth, reaffirming that global investors can take advantage of custodian services from global and domestic banks to invest domestically.

According to him, the uncertainty of global financial markets due to COVID-19 was rises although China has successfully overcome the epidemic. The latest assessment by the central bank showed that the government of China efforts has a positive impact lift up the economic activity in the world second largest economy.

However, the uncertainty of the financial markets increased after the discovery of virus cases widespread across the globe. Global investors are attracting funds to be placed in developing countries and transferring financial assets and commodities that are considered safe, such as United States treasury bonds and gold.

This condition then put pressure on the world financial markets and exerted considerable depreciation pressure on many global currencies, including Indonesia. Currently, he said, BI, government and other authorities are taking steps to stabilize the Rupiah and mitigate the impact of COVID-19 risk on the domestic economy.

He conveyed, the government has and will continue to increase the fiscal stimulus space and provide ease of doing business in the real sector, including tourism and export-import activities. While, the central bank continues to consistently maintain monetary stability, the Rupiah rate, financial markets, and drive the economic growth momentum.

At he latest meeting of the board of governor meeting on Feb. 19 – 20, the central bank cut its 7-Day Reverse Repo Rate (BI 7DRR) by 25 bps to 4.75 percent. Bank Indonesia also adjusted the provisions related to the calculation of the Macro-prudential Intermediation Ratio by expanding the scope of funding and financing at bank branches abroad for the Indonesian economy.

Payment system policies will also continue to be strengthened to support economic growth, among others, through the expansion of Quick Response Code Indonesian Standard acceptance as well as the social assistance and financial transactions of the regional governments.

Going forward, said Warjiyo, BI will continue to monitor developments of the financial markets and the economy, including the impact of COVID-19 and continue to strengthen the policy mix and coordination with the government and relevant authorities.

The spread of the coronavirus, which has infected more than 119,000 people worldwide with around 4,200 death tolls as of March 11, has disrupted business activity in various countries and global supply chains. Indonesia reported 34 confirmed cases and one death.

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