JAKARTA (TheInsiderStories) – Bank Indonesia (BI) could buy state bond as much as Rp242 trillion (US$16.33 billion) from the primary market, said finance minister at the hearing with commission XI of parliament today. Based on the agreement between the two parties, the central bank could absorb up to 25 percent of total issuances with same rate with investor.
“We are targeting [to issues state bond] Rp45 trillion every two weeks,” the minister, Sri Mulyani Indrawati, told the house speakers on Wednesday (06/05).
As reported, the country raised the bond issuances to Rp1,1,289.30 trillion to cover the 2020 State Budget’ deficit. Until first quarter (1Q) of this year, the government has issued Rp221.40 trillion of state bond and last April released global medium term notes $4.5 billion.
Due to COVID-19 pandemic, Indonesian government have decided to widened the budget deficit 5.07 percent of gross domestic products (GDP). Beside from the bond issuances, finance ministry also explore other options to finance the deficit, such as multilateral loans, budget surplus (Rp70.6 trilion), and funding from state firm.
In the cabinet meeting held today, Presiden Joko Widodo urged the economic ministers to “pay close” attention on the impact of the COVID-19 pandemic to the domestic economy, so the downside risk of the economic growth could be handle faster.
“Looked at in detail so the economic stimulus program really must be right on target and can start designing recovery scenarios in each sector or sub-sector,” he told the ministers and officials in the meeting.
He also called on all staffs to mobilize energy and strength to control the spread of COVID-19 and deal with the impact. He hope, the epidemic to start flattening in this month and the number of cases further decreases in June. He also set a target that by June and July, Indonesia must have entered a safe position.
The virus outbreak has hit the Indonesian economy from the demand and the supply side. From the supply side, the Manufacturing Index in April experienced the deepest contraction when compared to other countries in Southeast Asian at the level of 27.50. That number is lower than Korea (41.60), Malaysia (31.30), Vietnam (32.70) and the Philippines (31.60).
From the demand side, the household consumption has hit the domestic economy in the 1Q of 2020. The Statistic Indonesia reported the economic growth dropped sharply from 5.4 percent of GDP in the fourth quarter of 2019 to 2.97 percent of GDP until March.
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