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Jakarta Post

Looking closely at Bank Indonesia's dilemma

  • Rahmia Hasniasari

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PREMIUM
Jakarta   /   Fri, September 4, 2020   /  09:02 am
Looking closely at Bank Indonesia's dilemma Central role: Bank Indonesia (BI) staff are seen entering the central bank’s building on Jl. Thamrin in Central Jakarta on Feb. 26. BI is playing a key role in mitigating the impacts of COVID-19 on the national economy. (JP/Dhoni Setiawan)

In a crisis, the central bank suddenly becomes the “superhero” that is supposed to save the macroeconomy by ensuring a stable exchange rate and inflation, sufficient liquidity for the market and the public and, if the situation worsens, a bailout. This time it is no different. Since March, Bank Indonesia (BI) has tried to use all its firepower to mitigate the impact of COVID-19. First, since BI is able to buy a tradable government bond in the primary market as stated in Law No. 2/2020 (formerly Regulation in Lieu of Law (Perppu) 1/2020), it has bought around Rp 397.56 trillion (US$27.4 billion) worth of government bonds through private placement. The bonds financed the government programs to cope with the public health and economic crisis, providing social aid and various kinds of subsidies for the poor. Secondly, BI has gradually lowered the BI 7-day repo rate (BI7DRR)...

Disclaimer: The opinions expressed in this article are those of the author and do not reflect the official stance of The Jakarta Post.