TheJakartaPost

Please Update your browser

Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.

Jakarta Post

Debt switching and the complex dynamics of BI's independence

The law restricts the government from conducting debt switches without following specific procedures, such as initial offerings in the primary market.

Dipo Satria Ramli (The Jakarta Post)
Premium
Jakarta
Thu, January 30, 2025 Published on Jan. 28, 2025 Published on 2025-01-28T11:23:35+07:00

Change text size

Gift Premium Articles
to Anyone

Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Debt switching and the complex dynamics of BI's independence The logo of Bank Indonesia (BI) is seen in front of the central bank's building in Jakarta in this undated photo. (JP/Rafaela Chandra)

T

he independence of a central bank is a cornerstone of an effective monetary policy, ensuring that economic decisions are made based on economic indicators rather than political pressures. In Indonesia, Bank Indonesia (BI) has long been regarded as an independent institution, as mandated by Law No. 23/1999 on the central bank.

However, recent developments, particularly the proposed Rp 100 trillion (US$6.2 billion) debt-switching program between the government and BI, have raised questions about the extent of this independence in the long term.

During the COVID-19 pandemic, Indonesia, like many other countries, faced significant economic challenges. To mitigate these, the government and BI implemented a burden-sharing program to stimulate economic growth. This involved BI purchasing government bonds, effectively printing money to finance government spending on health, social protection and other critical areas.

Between 2020 and 2022, BI injected approximately Rp 1.1 quadrillion into the economy through this scheme.

Initially, BI was reluctant to do this burden-sharing program. However, then president Joko “Jokowi” Widodo's remarks about the need for institutions to "share the pain" highlighted the pressure on BI to support government initiatives.

While this program was crucial in addressing immediate economic needs, it blurred the lines between fiscal and monetary policy, raising concerns about BI’s independence.

Viewpoint

Every Thursday

Whether you're looking to broaden your horizons or stay informed on the latest developments, "Viewpoint" is the perfect source for anyone seeking to engage with the issues that matter most.

By registering, you agree with The Jakarta Post's

Thank You

for signing up our newsletter!

Please check your email for your newsletter subscription.

View More Newsletter

As of July 2024, BI held government securities amounting to 23.8 percent of the outstanding government bonds in the market, valued at Rp 1.37 quadrillion. This figure surpasses the value of government securities held by banks, insurance companies, pension funds and investment managers.

Your Opinion Matters

Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.

Enter at least 30 characters
0 / 30

Thank you

Thank you for sharing your thoughts. We appreciate your feedback.

to Read Full Story

  • Unlimited access to our web and app content
  • e-Post daily digital newspaper
  • No advertisements, no interruptions
  • Privileged access to our events and programs
  • Subscription to our newsletters
or

Purchase access to this article for

We accept

TJP - Visa
TJP - Mastercard
TJP - GoPay

Redirecting you to payment page

Pay per article

Debt switching and the complex dynamics of BI's independence

Rp 29,000 / article

1
Create your free account
By proceeding, you consent to the revised Terms of Use, and Privacy Policy.
Already have an account?

2
  • Palmerat Barat No. 142-143
  • Central Jakarta
  • DKI Jakarta
  • Indonesia
  • 10270
  • +6283816779933
2
Total Rp 29,000

Share options

Quickly share this news with your network—keep everyone informed with just a single click!

Change text size options

Customize your reading experience by adjusting the text size to small, medium, or large—find what’s most comfortable for you.

Gift Premium Articles
to Anyone

Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!

Continue in the app

Get the best experience—faster access, exclusive features, and a seamless way to stay updated.