Similar to the Indonesian government, Indonesia's central bank also announced a fiscal policy package to support sustainable nationwide economic growth by curbing inflation, maintaining a more sustainable balance of payments as well as strengthening financial system stability. These additional policies are expected to synergise with the policy package unveiled by the government on Friday (23/08). These measures were taken as both the rupiah and Indonesia's main stock index (IHSG) are in a downward spiral.
Below are the five measures that will be implemented by Bank Indonesia:
• Bank Indonesia extends the tenors of foreign exchange deposits from 7 days, 14 days and 30 days to 1 day up to a maximum of 12 months. This measure aims to broaden the diversity of tenors for foreign exchange of commercial banks at Bank Indonesia.
• Bank Indonesia loosens up foreign exchange-buying restrictions for exporters selling foreign exchange from export proceeds (DHE). This policy is designed to provide greater ease for exporters in purchasing foreign exchange using its underlying document from forex selling.
• Bank Indonesia adjusts the provision on foreign exchange swap for banks that is treated as a pass-on bank transaction with their counter parties. This measure aims to deepen derivative transactions.
• Bank Indonesia relaxes its foreign debt provisions, by extending the number of exemptions for short-term foreign debt, consisting of rupiah demand deposits (VOSTRO) for non-residents holding proceeds from divestments of direct investments and buyers of Indonesian shares and/or corporate bonds as well as tradable government securities (SBN). This policy aims to manage demand for foreign exchange by non-residents without undermining prudential aspects of banks engaged in foreign loans.
• Bank Indonesia issued Bank Indonesia Deposit Certificates (SDBI) to provide more room for banks to manage rupiah liquidity through tradable instruments, which in turn leads to financial market deepening.
US Dollar (USD) to Indonesia Rupiah (IDR)| Source: Bank Indonesia
Indonesia's Benchmark Stock Index (IHSG)