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Jakarta Post

Bank Indonesia allocates $8.25 billion to buy government bonds

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Fri, May 8, 2020   /   12:36 pm
 Bank Indonesia allocates $8.25 billion to buy government bonds Bank Indonesia Governor Perry Warjiyo (center) gives a press statement regarding policy measures to maintain monetary and financial stability amid the COVID-19 outbreak at the Bank Indonesia building, Jakarta, March 2. (Antara/Indrianto Eko Suwarso )

Bank Indonesia (BI) has allocated Rp 125 trillion (US$8.25 billion) to buy government bonds in the primary market to support state financing needs amid the COVID-19 outbreak, BI Governor Perry Warjiyo said.

Perry estimated that the government would sell back Rp 506.8 trillion of the bonds in the second to fourth quarter, adding that the market would absorb most of the bonds.

“BI will buy Rp 125 trillion worth of government bonds in the primary market for above the line financing needs,” Perry told House Commission XI overseeing financial affairs on Wednesday, during a heated debate on how far the central bank could intervene on the economy.

The government will offer Rp 856.8 trillion worth of bonds from the second quarter through to the end of the year to finance a widening budget deficit of 5.07 percent caused by extra spending for COVID-19 mitigation programs. It will need at least Rp 1.4 quadrillion in total financing this year.

BI has been allowed to buy government bonds from the primary market as a non-competitive bidder and Perry has said it will act as a buyer as a last resort to support budget financing.

The central bank has bought up to Rp 173.1 trillion (US$11.24 billion) worth of government bonds as of April 29, including at least Rp 6.95 trillion bought during auction in the primary market, to stabilize the rupiah and support the government’s financing needs.

“We are targeting Rp 45 trillion in bonds issuance every two weeks. This means that BI will need to buy around Rp 106 trillion to Rp 242 trillion based on market capacity in 2019,” Finance Minister Sri Mulyani Indrawati clarified to lawmakers during the same meeting.

“That is how much we pay with the market rate as BI uses the market mechanism, including greenshoe option and private placement,” the minister added.