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Jakarta Post

Government submits COVID-19 crisis playbook to House

Jokowi said the Perppu would serve as a basis for the government and banking and financial authorities to carry out “extraordinary measures to safeguard people’s health, the national economy and financial system stability”.

Adrian Wail Akhlas (The Jakarta Post)
Jakarta
Thu, April 2, 2020

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Government submits COVID-19 crisis playbook to House House of Representatives Speaker Puan Maharani (center) smiles after attending a plenary meeting at the House in Jakarta on Monday. (JP/Dhoni Setiawan)

T

he government has submitted to the House of Representatives a government regulation in lieu of law (Perppu) that allows financial authorities to roll out crisis protocols amid fears the COVID-19 pandemic will hit the economy hard.

Perppu No. 1/2020, signed by President Joko “Jokowi” Widodo on Tuesday and effective immediately, covers a range of measures that include allowing Bank Indonesia (BI) to throw a lifeline to the state budget through direct government bond purchases and giving policymakers impunity in taking extraordinary measures, as well as allowing the state budget deficit to surpass the legal 3 percent limit.

“The spread of COVID-19 has triggered a health and humanitarian crisis. This could potentially lead to an economic crisis and financial crisis,” Finance Minister Sri Mulyani Indrawati said during a livestreamed press briefing after submitting the regulation on Thursday. “The regulation will serve as a legal background to protect public health and help affected communities, businesses and the economy.”

Jokowi said on Tuesday the Perppu would serve as a basis for the government and banking and financial authorities to carry out “extraordinary measures to safeguard people’s health, the national economy and financial system stability”.

The government has announced that it will boost state spending by up to Rp 405.1 trillion (US$24.6 billion), pushing the budget deficit up to 5.07 percent of gross domestic product (GDP), to allow the country to afford the fight against COVID-19.

Of the extra spending, the government will allocate Rp 75 trillion for healthcare spending, Rp 110 trillion for social protection and Rp 70.1 trillion for tax incentives and credit for enterprises. The biggest chunk, Rp 150 trillion, will be set aside for economic-recovery programs including credit restructuring and financing for small and medium businesses.

Read also: Indonesia’s COVID-19 stimulus playbook explained

The government expects Indonesia’s economy to grow by 2.3 percent this year under the baseline scenario, which would be the lowest rate since 1999, or to contract by 0.4 percent in the worst-case scenario. Such scenarios have been made in the face of higher risks of a global recession, according to the finance minister.

The rupiah is projected to hover between Rp 17,500 and Rp 20,000 per US dollar under the worst-case scenario, a historic low even weaker than the 1998 Asian financial crisis level.

House Speaker Puan Maharani said during the same press briefing that the House would support the government’s efforts to safeguard public health and the economy, adding that lawmakers would discuss the Perppu for approval.

“We are hoping that by working together at a time like this, we will have a good impact on all Indonesians,” she said.

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