Indonesia strikes burden-sharing deal with central bank to help pay for recovery efforts

7 Jul 20

Indonesia’s government and central bank have agreed to a £32bn bond scheme to finance the country’s recovery efforts from the economic crisis caused by Covid-19.

 

Bank Indonesia will buy 397.5 trn rupiah (£21bn) of bonds to fund healthcare and social protection schemes, and will then return the bond yield to the government in full once they are sold on the market.

The cost of the remaining 177trn rupiah of bonds, which will be used to finance schemes to protect businesses, will be borne by the government.

Indonesia expects its 2020 budget deficit to be 6.34% as a result of the pandemic, and the government has repeatedly outlined that it believes recovery is a national shared responsibility, including the finance ministry and the central bank.

Finance minister Sri Mulyani Indrawati told a press conference that the ‘burden sharing’ agreement will be carried out with good governance, transparency and accountability in mind, as well as adhering to several main principles.

“The government and the central bank will still maintain fiscal and monetary prudence to ensure macroeconomic credibility in supporting growth and to create jobs,” the Jakarta Post quoted her as saying.

“The policy aims to increase confidence in economic recovery and the healthcare response.”

Indrawati said she remains committed to bringing the deficit down to below 3% by 2023.

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