Log in
Show password
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Indonesia unveils $30.5 bln bond sale scheme with c.bank for 2021, 2022

08/23/2021 | 05:11am EDT
A man walks past Bank Indonesia headquarters

* C.bank to buy bonds worth up to 215 trln rupiah in 2021

* In 2022, the bond purchase will be up to 224 trln rupiah

* BI to relinquish interests for bonds worth 98 trln rupiah

* Rise of Delta variant the main reason of new agreement

JAKARTA, Aug 24 (Reuters) - Indonesia's central bank will purchase government bonds worth up to 439 trillion rupiah ($30.46 billion) in 2021 and 2022 to provide cheaper financing for the government's COVID-19 relief measures, senior officials said.

The fiscal deficit financing scheme is similar to an agreement Bank Indonesia (BI) had with the finance ministry last year to fund ballooning healthcare and welfare bills amid the pandemic, which authorities said was a one-off measure.

Investors and economists have raised concerns https://www.reuters.com/article/us-indonesia-policy-rupiah-idUSKCN24E1BU about the scheme's effects on inflation and the rupiah.

In a call with investors on Monday, BI Governor Perry Warjiyo cited a rise in infections since June, driven by the Delta variant, as the main reason for the agreement under which BI will purchase up to 215 trillion rupiah worth of tradeable bonds in 2021 and 224 trillion rupiah in 2022.

The bonds will carry a floating interest rate equals to BI's three-month reverse repo rate - currently at 3.06%, but the central bank will return to the government interest payments for bonds worth 58 trillion rupiah in 2021 and 40 trillion rupiah in 2022.

"I cannot imagine buying vaccine, (paying for) medical expense, by issuing government bonds in the market with the cost of now about 6.3%. I cannot comprehend it," Warjiyo said, referring to the current yield of the benchmark 10-year bond.

Warjiyo and Finance Minister Sri Mulyani Indrawati stressed the agreement will not compromise BI's independence.

BI would continue its plan to reduce liquidity in the banking system next year, said Warjiyo, who also argued the bank's quantitative easing measures would be more effective by cooperating with fiscal authorities.

At a press briefing on Tuesday, the governor said the central bank was mindful of the agreement's impact on inflation, but he doesn't expect price pressures to heat up before 2023. Warjiyo also reiterated BI's earliest consideration for a rate hike would be at the end of 2022.

Sri Mulyani said the agreement would bring down the government's interest expense to roughly 2.2% of GDP in 2021, from an estimated 2.4%. She said that ratio will be maintained over the next several years, providing greater fiscal headroom for other spending.

"The bond purchases by BI could also limit the potential rise in (Indonesia's) bond yields amid a potential Fed tapering next year," said Josua Pardede, an economist with Bank Permata. "So I think this will be well accepted by investors."

Since the start of the pandemic, BI has cut its benchmark rate by a cumulative 150 basis points to a record low of 3.50% and injected more than $57 billion of liquidity into the financial system.

($1 = 14,410.0000 rupiah) (Reporting by Gayatri Suroyo; Editing by Ed Davies and Mike Harrison)

ę Reuters 2021
Latest news "Economy & Forex"
07:13aS.Korea's GL Rapha certified to produce Sputnik COVID-19 vaccines
07:12aUK annual pay data shows biggest rise since 2008
07:10aFormer ĹAmerican Pimp’ Turned Police Accountability Activist, Andre Taylor Revisits his Roots with ĹMany Shades of Dre’ Hip Hop Music and Video Project
07:10aWOGA Gymnastics and CaptainU Announce Partnership
07:05a6 Certified Nursing Assistants Are Leaving Profession for Every 1 Certified (Q2 2021) ľ Florida Patient Care at Risk Ahead of November Covid Vaccine Mandates
07:05aAudiosha Has Redefined the Occupational Health and Safety Services Industry with Technology, Diversity and Entertainment
07:05aMortgage Coach and HomeBinder partner to engage homeowners in actively managing home financing across the homeownership lifecycle
07:05aFluid Metering’s FVD Variable Dispense Pump Receives Gold in 2021 LEAP Awards
07:05aDarley Family Foundation Sends 5,000 Gallons of Water to Dixmoor, Ill.
Latest news "Economy & Forex"