BI weighs use of instruments to reduce economic impact of coronavirus

BI weighs use of instruments to reduce economic impact of coronavirus

CNBC Economic Outlook 2020 in Jakarta on Wednesday (Feb 26, 2020). (ANTARA/Dewa Wiguna)

This is very effective in smoothing our exchange rate
Jakarta (ANTARA) - ​​Bank Indonesia (BI) is considering the use of triple intervention instruments to reduce the impact of the coronavirus, or COVID-19, in order to ensure the monetary sector remains stable.

"What we will do, especially to stabilize the monetary sector, is to adopt triple intervention instruments," BI Senior Deputy Governor Destry Damayanti said, on the sidelines of CNBC Economic Outlook 2020 in Jakarta on Wednesday.

The three intervention instruments cover domestic non-delivery forward (DNDF), spot and bond markets, she said.

DNDF is an instrument to hedge foreign investors' assets in Indonesia. The settlement of DNDF transactions is done in Indonesia using the rupiah, which has proven capable of stabilizing the rupiah's exchange rate during the 2018-2019 period, she said.

"This has been very effective in smoothing our exchange rate," she added.

BI will also intervene in the spot market, but with limited capabilities.

"There is a close correlation between inflow offshore and the spot market. In the event of selling, some will buy on the spot (market), while others will maintain it in the rupiah," she said.

Also, BI will intervene in the bond market for government debt securities (SBN), she added.

"We also want to stabilize the financial sector, particularly the rupiah, so that yields on SBN will be 6.5 percent," she said.

BI earlier revised downward its target of national economic growth for 2020 from 5.1 to 5.5 percent to 5 to 5.4 percent, due to the spread of the coronavirus.

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