"Handling the impact of COVID-19 requires extraordinary measures, policies that have not been regulated or policies that exceed the authority set previously," said BI Governor Perry Warjiyo at a press conference held via video conferencing on Wednesday in Jakarta.
Coordinating Minister for Economic Affairs, Airlangga Hartarto, Minister of Finance, Sri Mulyani Indrawati, chairman of the OJK Board of Commissioners, Wimboh Santoso, and chair of the Board of Commissioners of LPS, Halim Alamsyah, also participated in the press conference on the issuance of Perppu 1/2020.
The government on March 31, 2020 issued the Perppu on state financial policy for ensuring financial system stability while handling the fallout from the COVID-19 pandemic, in accordance with guidelines on dealing with threats that endanger the national economy or the stability of the financial system.
The Perppu would expand the authority of Bank Indonesia by allowing it to buy long-term government bonds (SUN) and State Shariah Securities (SBSN) placed on the primary market to help the government finance measures to contain the impact of the COVID-19 outbreak on the financial system’s stability, the BI Governor explained.
"The purchase of government bonds (SBN) on the primary market is done in the event the market cannot absorb all the SBN issued by the government. The BI is a last resort," he continued.
Further provisions will be regulated jointly by the Minister of Finance and the Governor of BI, who will take into account financial market conditions and their impact on inflation.
As an anticipatory measure, BI would buy repo securities owned by LPS to bail out systemic banks and banks other than systemic banks who are facing solvency problems.
It would also provide short-term liquidity loans or short-term liquidity financing, based on Sharia principles, to systemic banks or banks other than systemic banks.
In addition, it would regulate the management of foreign exchange transactions for the Indonesian population.
Such foreign exchange transactions include provisions on the surrender, repatriation, and conversion of foreign exchange for maintaining macroeconomic and financial system stability.
The BI Governor said the central bank would continue to coordinate with the government, OJK, and LPS to closely monitor the dynamics of the spread of COVID-19 and its impact on the Indonesian economy from time to time, including further policy coordination for maintaining macroeconomic and financial system stability and sustaining Indonesia's economic growth.
Related news: Covid-19 hampers global economic recovery: BI
Related news: BI upbeat on Indonesia clocking 5.2-pct economic growth despite corona
Related news: Indonesia ready to face global economic slowdown amid corona outbreak