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New foreign currency securities for global investment opportunities
Through the issuance of foreign currency securities, Bank Indonesia (BI) aims to diversify its funding sources, strengthen foreign exchange reserves and enhance the stability of the rupiah.
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Face to face: Bank Indonesia (BI) Governor Perry Warjiyo delivers his speech during the annual BI meeting at the central bank’s hall in Jakarta on Nov. 29, 2023.
(Antara/Hafidz Mubarak A)
B
ank Indonesia (BI), as the central bank of Indonesia, plays a crucial role in maintaining monetary stability and supporting the development of the financial system. As part of its monetary policy, BI has introduced various instruments to regulate the money supply and manage exchange rates.
One such instrument is the issuance of Foreign Currency Securities known as Sekuritas Valas Bank Indonesia (SVBI) and Sukuk Valas Bank Indonesia (SUVBI). This instrument is a pro-market foreign currency monetary operation to increase foreign exchange supply and demand, supporting financial market deepening, capital inflows and exchange rate stability.
SVBI and SUVBI are short-term instruments with a tenor of less than one year, using foreign currency securities belonging to BI as the underlying assets.
The issuance of the instruments is timely following current market conditions and in line with the "cash is king" phenomenon and the limited quality of short-term instruments in foreign currency. SVBI and SUVBI also offer superior characteristics as quality assets with a pro-market, efficient and fast settlement mechanism.
Currently, the initial auction of SVBI and SUVBI is conducted in the primary market for commercial banks that have participated in foreign exchange monetary operations and the secondary market for residents and non-residents.
The characteristics of the SVBI and SUVBI are as follows: they are issued in US dollars and are scripless; they have a tenor of 1 month to 12 months; they are issued and traded using a discount system (SVBI) and returns (SUVBI); they maintain a minimum placement of US$1 million with multiples of $100,000 and units of $100,000 in the primary market; they cannot be the underlying foreign currency purchase for transactions; they have an early redemption feature by BI and for SUVBI, the contract used is al musyarakah al muntahiyah bi al tamlik.
The primary aim of these securities is to attract foreign investors and provide them with an opportunity to invest in the Indonesian economy. Foreign investors are enticed by the potentially higher returns compared to domestic investments, especially if the interest rates on SVBI and SUVBI are higher than those in other countries.
