After President Joko Widodo announced two peoples were positively infected by the coronavirus, Bank Indonesia (BI) injects liquidity of US$3.2 billion to local bank through various policies - Photo by President Office

JAKARTA (TheInsiderStories) – After President Joko Widodo announced two peoples were positively infected by the coronavirus, Bank Indonesia (BI) injects liquidity of US$3.2 billion to local bank through various policies. The decision has been taken to help the economy and to reduce the sell-off on the financial market.

“The global market has gone down but is starting to recover, meaning that it is not as deep as predicted. There are the steps that the government needs to anticipate,” said the coordinating minister for economic Affairs, Airlangga Hartarto at President Office in Jakarta, on Monday (03/02).

While, BI’ governor Perry Warjiyo explained, 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 COVID-19 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, the Bank, 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, BI continues to consistently maintain monetary stability, the Rupiah rate, financial markets, and drive the economic growth momentum.

While, the Financial Services Authority adopted a policy to stabilize the stock market and continue to strengthen the resilience of the banking industry and other financial services. As reported in 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.

In addition, BI 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.

Awaits Three Major CBs Policy

Globally, the world’ top three central banks look set to take steps to limit the economic damage from the fast-spreading coronavirus, with the leaders of European Central Bank (ECB) and Bank of Japan (BoJ) issuing emergency statements that echoed Powell statement last week.

Last Friday, Powell promised the Fed would “act as appropriate” to support the US economy. While, BoJ governor, Haruhiko Kuroda and ECB president Christine Lagarde, pledging to take actions as needed to stabilize markets jolted by the epidemic. They said, the virus outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets.

Lagarde stated, “We stand ready to take appropriate and targeted measures, as necessary and commensurate with the underlying risks. The coronavirus outbreak is a fast developing situation, which creates risks for the economic outlook and the functioning of financial markets.”

Today, the policymakers will also join finance ministers and other central bankers from the world’ seven largest economies on a call to discuss the widening crisis. So far, the virus has spread to 60 countries, killed more than 3,000 people and has upended global supply chains.

by Linda Silaen, Email: linda.silaen@theinsiderstories.com