Government Regulation in lieu of law (Perppu) No. 1/2020 stipulates that everything spent by the government on COVID-19 economic recovery programs will be regarded as a measure to save the economy from crisis and not a state loss.

“No actions, including decisions made based on this Perppu, may be subject to lawsuits that could be filed at a state administrative court,” says the Perppu on state finance and financial system stability to contain the COVID-19 pandemic.

The regulation, signed by President Joko “Jokowi” Widodo on Tuesday, provides impunity for Financial System Stability Committee (KSSK) members, which includes officials from the Finance Ministry, Bank Indonesia (BI), the Financial Services Authority (OJK) and the Deposit Insurance Corporation (LPS).

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The Perppu comes as the government forecasts Indonesia’s economic growth to drop to 2.3 percent this year, a level unseen in 21 years, it may even contract by 0.4 percent under the worst-case scenario as the COVID-19 pandemic stifles businesses and households. The rupiah may also depreciate further to between Rp 17,500 and Rp 20,000 per US dollar, a historic low, from around Rp 16,500 today.

Finance Minister Sri Mulyani Indrawati said the regulation would provide financial authorities with legal protection to take “extraordinary measures in protecting the economy”.

“We are very aware that we must be very careful to avoid moral hazard,” Sri Mulyani told reporters on Wednesday. “We will formulate a safeguard so that policymakers that are taking measures to improve public health and the economy cannot be criminalized because of the acts of others.”

The Perppu also relaxes Indonesia’s budget deficit cap to allow it to surpass its legal limit of 3 percent of the nation’s gross domestic product (GDP). Jokowi has announced a plan to add an extra Rp 405.1 trillion spending into the state budget for healthcare spending and the social welfare safety net, as well as a stimulus package for businesses that suffer as a result of COVID-19, with the budget deficit expected to widen to 5.07 percent of GDP.

Furthermore, the regulation will also allow the central bank to buy LPS debt papers through repurchase (repo) agreements to provide liquidity should there be financial problems within the banking industry.

“The OJK will be very assertive in selecting which financial institutions have a bad track record to discipline them and will allow only those with good track records to take such measures,” the Sri Mulyani said.

“This is a preventive measure if it needs to be taken,” BI Governor Perry Warjiyo added.

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The Perppu will allow the central bank to buy debt papers directly issued by the government so the state budget can afford to bail out businesses at highest risk from economic shocks caused by the pandemic.

Perry said the central bank would act as a lender of last resort rather than a first off-taker of the government bond issuance, which means the market will be prioritized in absorbing the debt papers. He said the central bank has yet to determine the size of the potential purchase.

“BI is granted the authority to buy government debt papers and sharia bonds not as a first lender but as a last lender in the case when the market cannot fully absorb the papers,” Perry said on Wednesday. “The finance minister has stressed that BI is a last resort. This we will maintain for macroeconomic stability.”

COVID-19 had infected more than 1,677 people with 157 dead in Indonesia as of Wednesday. Globally, the COVID-19 pandemic has infected more than 860,000 people and claimed at least 42,000 lives.