Jakarta. President Joko "Jokowi" Widodo said Bank Indonesia, the country central bank, needed to continue its efforts in maintaining the stability of the rupiah exchange rate amid the financial market turmoil caused by the Covid-19 pandemic.
The country has seen more than $6.7 billion capital outflows so far this year as foreign investors grew wary of the pandemic, battering its stocks and bond market and pushed the rupiah exchange rate to a level the country's never see since Asian Financial Crisis 1998.
"Bank Indonesia [needs] to continue focusing on maintaining the stability of the rupiah exchange rate, inflation, and accelerating the regulations on the use of rupiah accounts in the country," Jokowi said at a limited meeting on fiscal and monetary policy through a video teleconference in Bogor, on Friday.
The rupiah traded in the range of 15,950 to 16,037 against the US dollar on the spot market on Friday.
He also asked for the availability of sufficient liquidity in the country, and the authorities in the financial sector to prepare risk mitigation in the face of financial market turmoil caused by the Covid-19 pandemic.
"I'm asking for synergy in policies to be strengthened between the central government, the Finance Ministry, Bank Indonesia, the Financial Services Authority [OJK], and the Indonesian Deposit Insurance Corporation," Jokowi said.
The president said pandemic would slash the global economic growth by half to 1.5 percent this year. Amid such condition, Indonesia was unlikely to reach its 5.0-5.4 percent growth target, he said.
"We have to face this challenge, especially in fiscal matters," Jokowi said.
"Yesterday at the meeting, I asked for refocusing, reallocation of the state budget, and regional budgets. I'm asking to focus on three things, first, health, particularly Covid-19 control, second, social safety net, such as social assistance, and thirdly economic incentives for businesses and MSMEs so that they can continue to produce and avoid layoffs" Jokowi said.
Bank Indonesia's Intervention
Bank Indonesia Governor Perry Warjiyo said that the central bank kept intervening to stabilize the rupiah in the spot market. The central bank was also active in the secondary market to buy government bonds sold by foreign investors and in the domestic non-deliverable forward (NDF) market.
"We continue to inject liquidity both in rupiah and foreign exchange. This year alone, we injected almost Rp 300 trillion," Perry said in the meeting.
He sad more than Rp 105 trillion have flown out this year as of Thursday and continued to increase due to global economic pressures.
Bank Indonesia also encouraged the business community, including exporters, to help maintain the rupiah exchange rate, by not holding the US dollar. Exporters can release the US dollar to the market, thereby providing a supply of US dollars on the foreign exchange market.
"Therefore, in this context, President Joko Widodo gives direction so that all potential supply in the country is mobilized, including exporters who have been holding the dollar, also to supply the foreign exchange market," Perry said.