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Jakarta Post

Experts urge BI to have exit strategy from burden-sharing scheme as risks loom

  • Adrian Wail Akhlas

    The Jakarta Post

PREMIUM
Jakarta   /   Thu, September 10, 2020   /  09:53 am
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The government and Band Indonesia have agreed to a US$40 billion debt monetization scheme to be implemented this year only to fund Indonesia’s COVID-19 response. (JP/Rafaela Chandra)

Bank Indonesia (BI) needs an exit strategy from a scheme to finance the country’s fiscal deficit, as risks loom in the long run over the government’s plan to have a wide deficit again next year and lawmakers propose to revise prevailing laws on the central bank, experts have said. The government’s plan to run with a big budget deficit this year and next year, signaling that the “burden sharing” agreement is not a “one-off operation”, said Australia-based Lowy Institute nonresident fellow Stephen Grenville. The recent House of Representatives’ proposal to make the bond-buying program permanent could pose risks to the country’s economy, he added. The burden sharing scheme and the bill might erode the central bank’s profits and its independence and cause inflation in the long run, Grenville told a discussion on Tuesday. ...