President Prabowo Endorses Seven-Point Strategy to Stabilize Rupiah and Fortify Financial System
Jakarta, The Gulf Observer: President Prabowo Subianto has formally endorsed a comprehensive seven-point strategic framework proposed by Bank Indonesia (BI) to stabilize the rupiah and safeguard national financial stability. The measures were finalized during a high-level meeting with the Financial System Stability Committee at the Presidential Palace on Tuesday.
Governor Perry Warjiyo outlined the following core strategies aimed at mitigating currency volatility and managing external economic pressures:
1. Market Intervention and Reserve Management
Bank Indonesia will intensify interventions in both onshore and offshore foreign-exchange markets. Governor Warjiyo affirmed that the nation’s foreign-exchange reserves remain “more than sufficient” to counter volatility and ensure currency steadying.
2. Strengthening Capital Inflows
The central bank will prioritize attracting foreign portfolio inflows through various rupiah securities instruments. This strategy is designed to ensure that new capital arrivals effectively offset any outflows from government bonds and equities, maintaining a positive year-to-date flow.
3. Enhanced Fiscal-Monetary Coordination
BI will maintain close cooperation with the Ministry of Finance regarding the secondary bond market. Following the purchase of Rp123.1 trillion ($7.6 billion) in bonds earlier this year, the central bank will continue coordinated efforts, including potential government buybacks.
4. Liquidity Maintenance
The fourth pillar focuses on ensuring ample liquidity within the banking system and money markets. Current base money growth, recorded at 14.1%, provides a robust foundation for continued financial stability.
5. Curbs on Speculative Demand
To mitigate speculative domestic demand, authorities have implemented tighter restrictions on US dollar purchases:
- The monthly cap for dollar purchases without underlying transactions has been reduced from $100,000 to $50,000 per person.
- Preparations are underway to further lower this threshold to $25,000, necessitating supporting documentation for larger transactions.
6. Expansion of Offshore Intervention
Bank Indonesia will permit domestic lenders to engage in offshore non-deliverable forward (NDF) markets. This move is intended to increase the available supply of US dollars and provide additional stability to the rupiah.
7. Strengthened Regulatory Oversight
In collaboration with the Financial Services Authority (OJK), BI will heighten supervision of banking and corporate foreign-exchange activities. This includes rigorous monitoring of institutions with significant US dollar demand to ensure the overall integrity of the financial system.
