JAKARTA (TheInsiderStories)–Indonesia’s central bank issues 9-month and 12-month Bank Indonesia (BI) certificate on Monday (23/07) to boost capital inflow.
Head of BI Monetary Management Department Nanang Hendarsah on Sunday (22/07) said the central bank has conducted socialization related to the auction. “[We] already socialized to banking industry on Friday [20/07],” he said, as quoted by Bisnis Indonesia.
Hendarsah did not mention the indicative target of the Bank Indonesia certificate auction. The central bank enforces a 7-day holding period for the certificate.
Bank Indonesia’s Economic and Monetary Policy Department Head Aida S. Budiman added the Bank Indonesia certificates auction will increase the number of domestic financial instruments available amid global economic uncertainty.
“The investors tend to adjust their portfolio so that we need to add the available instrument as well as to deepen the financial markets,” she added.
Bank Indonesia‘s Governor Perry Warjiyo stated the Bank Indonesia certificate will attract the foreign investors to enter Indonesia’s financial market, in addition to the interest rate hike.
The central bank has gradually removed the Bank Indonesia certificate since 2016 and planned to remove it altogether and shift to treasury bills as monetary instruments by 2024. Bank Indonesia last conducted 9-months and 12-months Bank Indonesia certificate in December 2016.
The reintroduction Bank Indonesia certificate raised concernason the cost of monetary operations.
Bank Indonesia’s Senior Deputy Governor Mirza Adityaswara said the global uncertainty condition, the normalization of the US Federal Reserve policy, and Chinese Yuan depreciation have impacted capital outflows in the emerging markets.
“This causes a capital reversal, so the exchange rates of developing countries depreciate, including Indonesia, so it is important to boost capital inflow,” he added.
If Bank Indonesia certificates applied, Adityaswara stated the 9-months and 12-months Bank Indonesia deposit certificates temporarily suspended.
Indonesia is suffering foreign capital outflow due to the global and domestic market conditions that reached Rp27 trillion in January to June.
The rupiah exchange rate has surpassed the psychological level of Rp14,000 per US$1. Rupiah exchange rate strengthens 24 points or 0.17 per cent at Rp14,471 per US$1 at 10.08 WIB today, according to Bloomberg. Meanwhile, the exchange rate reference of Jakarta Interbank Spot Dollar Rate (Jisdor) strengthens to Rp14,454 per US$1 today, up 66 points or 0.45 per cent from Rp14,520 on Friday (20/7).