The central bank of Indonesia (BI) (Photo: Jakarta Post) Jakarta (VNA) – Indonesia’s central bank (BI) hasbought 1.6 billion USD worth of government bonds in the primary market,underlining its commitment to remain active in it as the country faces aburgeoning state budget deficit due to the rising cost of COVID-19 mitigationefforts.
Indonesian Finance Minister Sri Mulyani Indrawati on May 18said the deficit might reach up to 1,028.5 trillion rupiah (69 billion USD)this year, or 6.27 percent of the country's GDP – the biggest in at least threedecades.
Tax revenue is also expected to shrink as the governmentcuts corporate income taxes. Meanwhile, the stimulus package to help theeconomy cope with a prolonged pandemic will increase state spending even more.
To counter the expanding deficit, BI Governor Perry Warjiyosaid the central bank will buy more government bonds to help the governmentmeet its fiscal financing obligations in the primary market.
BI had signed an agreement with the Finance Ministry to buythe government bonds and until May 14 it had already bought 22.8 trillion rupiahworth of the bonds from the primary market.
The central bank is buying the bonds straight from thegovernment through non-competitive bidding. BI is allowed to buy up to 25percent of the issuance target, according to the BI governor.
Perry has also encouraged banks in need of more liquidity totrade their bond holdings to the central bank in a repurchase agreement (repo).
According to BI's data, Indonesian banks' total bondholdings were valued at 886 trillion rupiah as of May 14.
This facility is part of the government's National EconomicRecovery program, which also promotes credit restructuring for small and mediumenterprises (SMEs)./.
