B

ank Indonesia (BI) has continued to inject up to Rp 300 trillion (US$18.19 billion) into the financial markets and banks to help support the country’s crashing currency as foreign investors sell off Indonesian assets over COVID-19 fears.

BI Governor Perry Warjiyo said the central bank had bought back government bonds worth Rp 168.2 trillion this year, with bank repurchase agreements (repos) to provide another Rp 55 trillion. The central bank’s policy of lowering the reserve requirement ratio will also free up another Rp 75 trillion for banks to finance businesses, he added.

“We are injecting liquidity to make sure the rupiah is able to meet banks’ needs and foreign exchange is adequate in the money market,” Perry told reporters on Tuesday. “The central bank will continue to intervene through the spot market, domestic non-deliverable forward and bonds if needed.”

The central bank has recorded Rp 125.2 trillion in capital outflow from government bonds, the stock market and BI certificates so far this year. Foreign investors sold Rp 112 trillion in government bonds and Rp 9.2 trillion in Indonesian shares, with most of the sell-offs recorded this month.

The rupiah has weakened almost 20 percent against the greenback this year to 16,500 per US dollar as of 4 p.m. in Jakarta on Tuesday. It reached the lowest level of 16,625 on Monday, a level unseen since the 1998 financial crisis. The Jakarta Composite Index (JCI), meanwhile, has lost more than a third of its value.

“We are currently reassessing macroeconomic assumptions and we will communicate the results in time,” said Perry. “We are working very hard to contain the COVID-19 effects on the economy.”

The central bank slashed its benchmark interest rate, the BI seven-day reverse repo rate, by 25 basis points to 4.5 percent after a cut of the same size last month. It also started offering term repos with maturities ranging from one week to 12 months from Monday, in addition to extending foreign-exchange swap facilities of one-, three-, six- and 12-month tenors, to ensure ample rupiah liquidity.

BI also announced that it had expanded the scope of underlying transactions for domestic non-deliverable forwards by including the rupiah accounts of foreign parties, such as savings accounts, demand and term deposits.

Separately, Bank Permata chief economist Josua Pardede said that while currencies in emerging markets — including the rupiah — had weakened against the US dollar, current economic fundamentals were much better than those in the 1998 crisis.

“Even though the rupiah has almost reached the 1998 crisis level, the current depreciation rate of 19 percent year-to-date is much lower than the depreciation rate of 600 percent during the 1998 crisis,” Josua told The Jakarta Post. “This means that Indonesia’s economic fundamentals are much stronger compared to the situation in 1998.”

Meanwhile, State-Owned Enterprises (SOEs) Minister Erick Thohir has instructed state-run firms to be ready to endure losses caused by weak demand during the COVID-19 pandemic, especially those firms in the transportation and travel sectors.

Speaking to the media via teleconference on Tuesday, Erick said SOEs should not be thinking about their balance sheets at the moment but focus on playing their part in helping to curb the pandemic’s impact on the people and the economy.

He especially mentioned state airport operators PT Angkasa Pura (AP) I and AP II, as well as train operator PT Kereta Api Indonesia (KAI).

“They are all ready to book losses and keep their operations going,” said Erick.

Despite the declining demand for transportation modes such as trains, airplanes and ferries, Erick said state-owned firms would continue providing maximum service to the public.

He added that he had also told state-owned banks to maintain operations as they could play a part in helping the government disburse cash assistance to impacted families.

The ministry is also conducting reviews of the operations of transportation SOEs and maintaining talks with the government and local administrations on limiting their services. The government has urged Indonesians to work, study and pray from home and implement social distancing to slow down COVID-19 infections in Indonesia.

The SOEs Ministry may also propose incentives for state electricity firm PLN and telecommunications firm PT Telekomunikasi Indonesia (Telkom) to provide essential services for Indonesians as they stay at home, Erick said.

As of Tuesday, Indonesia has 686 confirmed cases of COVID-19 and 55 deaths. Globally, the pneumonia-like illness has infected over 381,000 people and claimed at least 16,500 lives.