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Ada Pertanyaan? Hubungi Kami Nadia Maharani, Fitri N. Heriani
As the value of the rupiah continues to slide, slow economic growth within the country cannot be held wholly responsible for the depreciation of the Indonesian currency. Also a major factor has been the US Federal Reserve's recent interest-rate hike, which has been implemented amid a general tightening of US monetary policy. This rise in US interest rates is leading to global uncertainty, as currencies around the world weaken against the USD.The rupiah has depreciated by nearly 10 percent in recent weeks and so, in an effort to prevent capital outflows and speculation against the weakening currency, Bank Indonesia (BI) has affirmed its commitment to supporting the rupiah in its volatility through the issuance of seven short-term policies. Juda Agung, BI spokesperson and Executive Director at the Department of Economic and Monetary Policy, weighed in on the issue last Thursday, declaring:
“Temporarily, Bank Indonesia will direct its focus towards policies which will support the stability of the rupiah.”
These seven policies break down as follows. Firstly, Bank Indonesia will not only conduct a hands on intervention in the foreign-exchange market, but will also increase purchasing of government securities in order to control the rupiah’s volatility. Thirdly, through the so-called Open Market Operation, liquidity management of the rupiah will be strengthened.
Adjusting to a “once-a-week” auction for foreign-exchange swaps is the fourth policy to be followed. Next up, the term-deposit auction mechanism is being changed to a fixed-rate tender for price adjustments and a system of three-month tender extensions.
The sixth policy is to limit total monthly dollar purchases to USD 25,000 per customer, who must also provide a mandatory tax-ID number. And finally, a policy of coordination between the relevant ministry and central bank is being followed in an effort to strengthen the country's foreign-exchange reserves.
In short, these policies can be grouped intro three specific strategies: strengthening the rupiah’s liquidity, strengthening supply-and-demand management regarding foreign currencies, and strengthening Indonesia's foreign-exchange reserves.
The constantly changing economic dynamics in the US is currently leaving a giant financial footprint around the world. For Indonesia, it remains unclear whether BI will maintain this new policy stance or later amend it, however ongoing global pressure is currently forcing the central bank to maintain a tight monetary policy in order to support the ailing rupiah.
“The data is changing quickly in the US, including its performance data. However thus far, there has not been a change of stance on our part,” concluded Mr. Agung.
Previously, in the wake of the current depreciation, the Financial Stability Coordination Forum also committed itself to strengthening policies designed to maintain economic growth and stability.
Minister of Finance, Bambang Brodjonegoro, confirmed his support for BI at a press conference held on August 13th at the Ministry of Finance. The Minister also stated that two short-term policies were being taken regarding the aim of increasing government and private investment, as well as increasing society’s buying power as a whole, as relates to domestic consumption.
(sp)
Nadia Maharani, Fitri N. Heriani
As the value of the rupiah continues to slide, slow economic growth within the country cannot be held wholly responsible for the depreciation of the Indonesian currency. Also a major factor has been the US Federal Reserve's recent interest-rate hike, which has been implemented amid a general tightening of US monetary policy. This rise in US interest rates is leading to global uncertainty, as currencies around the world weaken against the USD.The rupiah has depreciated by nearly 10 percent in recent weeks and so, in an effort to prevent capital outflows and speculation against the weakening currency, Bank Indonesia (BI) has affirmed its commitment to supporting the rupiah in its volatility through the issuance of seven short-term policies. Juda Agung, BI spokesperson and Executive Director at the Department of Economic and Monetary Policy, weighed in on the issue last Thursday, declaring:
“Temporarily, Bank Indonesia will direct its focus towards policies which will support the stability of the rupiah.”
These seven policies break down as follows. Firstly, Bank Indonesia will not only conduct a hands on intervention in the foreign-exchange market, but will also increase purchasing of government securities in order to control the rupiah’s volatility. Thirdly, through the so-called Open Market Operation, liquidity management of the rupiah will be strengthened.
Adjusting to a “once-a-week” auction for foreign-exchange swaps is the fourth policy to be followed. Next up, the term-deposit auction mechanism is being changed to a fixed-rate tender for price adjustments and a system of three-month tender extensions.
The sixth policy is to limit total monthly dollar purchases to USD 25,000 per customer, who must also provide a mandatory tax-ID number. And finally, a policy of coordination between the relevant ministry and central bank is being followed in an effort to strengthen the country's foreign-exchange reserves.
In short, these policies can be grouped intro three specific strategies: strengthening the rupiah’s liquidity, strengthening supply-and-demand management regarding foreign currencies, and strengthening Indonesia's foreign-exchange reserves.
The constantly changing economic dynamics in the US is currently leaving a giant financial footprint around the world. For Indonesia, it remains unclear whether BI will maintain this new policy stance or later amend it, however ongoing global pressure is currently forcing the central bank to maintain a tight monetary policy in order to support the ailing rupiah.
“The data is changing quickly in the US, including its performance data. However thus far, there has not been a change of stance on our part,” concluded Mr. Agung.
Previously, in the wake of the current depreciation, the Financial Stability Coordination Forum also committed itself to strengthening policies designed to maintain economic growth and stability.
Minister of Finance, Bambang Brodjonegoro, confirmed his support for BI at a press conference held on August 13th at the Ministry of Finance. The Minister also stated that two short-term policies were being taken regarding the aim of increasing government and private investment, as well as increasing society’s buying power as a whole, as relates to domestic consumption.
(sp)