Indonesia is preparing a government regulation in lieu of law on financial system reform to accommodate a deeper crisis situation due to the pandemic, said finance minister on Tuesday (08/25) - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – Financial Service Agency (FSA) has signed the joint decree with the government to support the National Economic Recovery Program (ERP), said the agency on Thursday (06/11). The decree focused on the coordination implementation of placement of funds and interest subsidies for the companies.

“This joint agreement shall take effect as from the date of stipulation until by Dec. 31, 2021,” said the statement.

This joint decree is mandated by the Government Regulation Number 23 Year 2020 and aims to facilitate coordination between the both parties as well as optimizing the provision of information from FSA in the context of placement funds and the provision of interest subsidies, specifically in the determination participating banks, placement of funds or extension of placement of funds at the participating banks, as well provision of interest subsidies.

As known, in May, President Joko Widodo has signed a special rule  Government Regulation Number 23 of 2020 regarding ERP. The regulation written that the government can carry out capital injection to state-owned enterprises (SOEs), placement of funds, government investment, and guarantees for the program. The program can also be implemented through state expenditure.

In policy making, the coordinating minister for the economic affairs, the coordinating minister for maritime and investment affairs, the minister of finance, the governor of Bank Indonesia, chairman of the Financial Service Agency and Deposit Insurance Agency will determined the implementation strategy of the ERP, including in setting priorities in the business sectors affected by the epidemic.

in Article 8, its written that the capital injection is given in order to improve the capital structure of SOEs and subsidiaries affected by COVID-19. The funds can also be given to increase the business capacity of SOEs and subsidiaries, including to carry out special assignments in the implementation of the ERP Program.

Finance minister, Sri Mulyani Indrawati explained, the government prepared the ERP Funds around Rp641.12 trillion (US$45.79 billion). In detail, part of the funds will used to support the consumption budget Rp172.1 trillion and an interest subsidy Rp34.15 trillion.

The government also provided tax incentives with total amount Rp123.01 trillion, including stimulus reserves amounting to Rp26 trillion. The country also allocates Rp25.27 trillion for capital injection to the SOEs.

Then, provides fuel subsidies in the framework of mandatory biodiesel 30 percent worth of Rp2.78 trillion. in addition, the compensation payment Rp90.42 trillion for state energy firm, PT Pertamina amounting to Rp45 trillion, food operator Perum Bulog at Rp560 billion and power producer, PT Perusahaan Listrik Negara (PLN) worth of Rp45.42 trillion.

For the tourism sectors, her ministry budgeted Rp3.8 trillion, housing Rp1.3 trillion, and spending Rp60 trillion. There are also support for local government worth of Rp15.1 trillion, consisting of special allocation reserves Rp9.1 trillion, economic recovery up to Rp5 trillion, and loans to the regions as much as Rp1 trillion.

Moreover, guarantee of new working capital loans for micro, small, and medium enterprises (MSMEs) Rp6 trillion. Indrawati revealed, the government also provides a bailout fund for MSMEs working capital worth of IDR19.65 trillion and a placement of funds for loan restructuring Rp87.59 trillion.

Funding will be carried out through the state bond issuances purchased by Bank Indonesia through the primary market. Director general at the ministry, Luky Alfirman added, the policy has been ruled by the Presidential Decree Number 23 of 2020

Based on the decree, the economic recovery program can be carried out through the mechanism of placement of funds, guarantees, state capital injection, and government investment. At present, said the minister, the government has completed the design of two programs.

US$1: Rp14,000

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