Jakarta. The government is mulling over a plan to issue recovery bonds – extraordinary debt notes that would allow Bank Indonesia, the country's central bank, to inject cash in an effort to help local businesses survive economic shocks from the Covid-19 pandemic and avoid firing their workers.
Susiwijono, the secretary of the Coordinating Ministry for Economic Affairs, said the government would sell the recovery bonds to Bank Indonesia and to private investors soon.
The government will then use the proceeds for special loans to local businesses.
"To reduce the number of worker layoffs, we need to ensure that businesses can maintain their cash flow," Susiwijono said in a teleconference on Thursday.
"The government is exploring the idea of issuing a new form of bonds, called the recovery bond. The proceeds will be channeled through special loans that are designed to be as unrestricted as possible so entrepreneurs could kick start their businesses," Susiwijono said.
The Jakarta Composite Index rebounded by more than 10 percent on Thursday, one of the largest one-day increases in the past decade, following the announcement.
Current laws prevent Bank Indonesia from buying government bonds directly from the government.
The central bank can only purchase the instruments in the secondary market.
Susiwijono said the government plans to issue a regulation-in-lieu-of-law (Perppu) to remove the limitation.
"We expect our colleagues at the Finance Ministry to complete the Perppu tomorrow, which will give us the legal basis for issuing recovery bonds," Susiwijono said.
Entrepreneurs in the retail, hospitality, transportation, entertainment and manufacturing sectors have been crying for help from the government as the Covid-19 pandemic forces customers to stay home and reduce spending.
Finance Minister Sri Mulyani Indrawati said the government had even prepared for a worst-case scenario in which a prolonged pandemic grinds the Indonesian economy to a halt, resulting in a 0 percent growth this year.
Jemmy Kartiwa, the chairman of the Indonesian Textile Association (API), said on Monday that the textile industry, which provides around 1.4 million jobs in Indonesia, is finding it difficult to keep afloat while still keeping workers in their jobs.
"In the past 10 days, demand dropped sharply, orders were also canceled. This is happening on a large scale, so we're asking for a relaxation [of government rules]," Jemmy said.
Manpower Minister Ida Fauziyah issued a circular last week allowing some leeway for businesses to implement wage adjustments.
The circular said businesses need to reduce their production activities to prevent Covid-19 from spreading.
As long as their workers agree, they could reduce wages in line with the drop in production, according to the circular.