JAKARTA (TheInsiderStories) – Indonesian central bank (BI) has implemented quantitative easing (QE) with values Rp386 trillion (US $24.90 billion) during January to April 2020, said the governor. The various monetary policies has bring the Rupiah getting stronger amid the pressures from COVID-19, near to the target level Rp15,000 a US Dollar by the end of this year.
In details, during January to April, about Rp166.2 trillion was sourced from purchases of state bonds in the secondary market, banking repo terms amounting to Rp137.1 trillion, a reduction in the statutory reserves about Rp53 trillion, and foreign exchange swaps of Rp29.7 trillion.
Next month, worth of Rp117.8 trillion was sourced from the reduction in the minimum required of Rupiah account of Rp102 trillion and did not impose additional giro obligations to fulfill the macro-prudential intermediation Ratio of Rp15.8 Trillion. In total, the QE policies has costs Rp503.8 trillion.
According to the governor, Perry Warjiyo, the monetary policies will become more effectives if the fiscal policy runs well. In addition, the debt restructuring conducted by Financial Service Agency will be very helpful so that QE funds can flow to the real sector.
“The faster the fiscal stimulus, the impact on QE will further increase economic activity,” he told reporters during a video conference today (04/29).
Today, Indonesian Rupiah closed up 0.98 percent to 15,295 versus the American Dollar compared to previous day. Warjiyo revealed, the local exchange rate movements are influenced by technical factors caused foreign exchange needs of corporations.
Other factors, the Fitch rating estimates that Indonesia’ economic growth in 2020 is around 2.8 percent of gross domestic products (GDP), lower than the previous year, but still higher than BI’ estimate around 2.3 percent of GDP. But, he noted, there are a number of positive factors that influenced the exchange rate, such as the high number of bids for state bond auctions amounting to Rp44.4 trillion.
“This shows the interest of foreign and domestic investors to buy state bonds high. In addition, the strengthening of stock futures in the United States and Europe is also a positive factor that influences exchange rate movements,” said Warjiyo.
Fundamentally, he continued, the local currency is still undervalued supported by the current account deficit (CAD) in the first quarter will be lower than 1.5 percent of GDP and overall in 2020 will be lower than 2 percent of GDP. The reduction in the CAD it means that foreign exchange shortages will be lower and will support the strengthening of the Rupiah rate towards its fundamentals.
“Bank Indonesia will always be in the market and take the necessary steps to maintain theexchange rate stability,” the gove rnor stated.
He also reported, an average foreign capital outflow of Rp29.2 trillion with a duration about four months followed by an inflows of Rp229.1 trillion with a duration of about 21 months. Then, the risk premium is predicted to decrease after the COVID-19 pandemic ends.
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