Bank Indonesia (BI) has unveiled a comprehensive strategy to safeguard rupiah stability, with Governor Perry Warjiyo announcing seven key measures. These initiatives range from robust foreign exchange market interventions to stringent oversight of US dollar purchases.
Elaborating on the first crucial step, Perry Warjiyo detailed BI’s planned interventions in both domestic and international foreign exchange markets. These actions will leverage various instruments, including spot transactions, Domestic Non-Deliverable Forward (DNDF), and offshore NDFs in major global financial centers such as Hong Kong, Singapore, London, and New York.
“We will continue our interventions to stabilize the rupiah, both domestically and internationally. Our foreign exchange reserves are more than sufficient,” Perry stated from the State Palace, as quoted on Wednesday (6/5). This underscores BI’s strong commitment and ample resources to maintain currency resilience.
The second and third steps involve fortifying foreign capital inflows and maintaining support for domestic markets. BI aims to strengthen foreign capital inflows through its Bank Indonesia Rupiah Securities (SRBI) instruments. This move is designed to counteract outflows observed from the Government Securities (SBN) and stock markets. Additionally, BI will continue its proactive purchases in the secondary market, which have already reached Rp 123.1 trillion year-to-date.
Fourth on the agenda, Bank Indonesia is committed to ensuring ample liquidity within the banking sector. This commitment is evidenced by the robust primary money growth, which currently stands at 14.1 percent, reflecting a healthy financial environment.
In a significant move to curb speculative activities, BI is tightening regulations on foreign currency purchases that lack an underlying transaction. The previous monthly limit for dollar purchases, set at USD 100,000 per person, has already been reduced to USD 50,000 and is slated for a further reduction to USD 25,000.
“Consequently, any dollar purchases exceeding USD 25,000 must be supported by an underlying transaction,” Perry emphasized, highlighting the central bank’s focus on legitimate foreign exchange activities.
Complementing these efforts, BI is actively promoting the use of local currencies. This includes the strategic development of a yuan-rupiah market, a crucial initiative aimed at reducing the nation’s overall dependence on the US dollar.
The sixth measure involves strengthening BI’s intervention in the offshore NDF market by engaging domestic banks to boost liquidity supply. Finally, as the seventh step, Bank Indonesia will enhance its supervision of banks and corporations with significant dollar purchasing activities, working in close cooperation with the Financial Services Authority (OJK) to ensure compliance and market stability.
Summary
Bank Indonesia has implemented seven strategic measures to stabilize the rupiah, focusing on robust market interventions through spot transactions and Non-Deliverable Forwards. The central bank is leveraging its foreign exchange reserves while actively attracting capital inflows via Bank Indonesia Rupiah Securities (SRBI) and proactive secondary market purchases. These efforts are supported by maintaining sufficient banking liquidity and a healthy financial environment.
To further protect the currency, the bank is curbing speculative activity by tightening regulations on foreign currency purchases, requiring underlying transactions for amounts exceeding USD 25,000. Additionally, BI is promoting local currency settlements to reduce dependence on the US dollar and enhancing supervision of corporations through collaboration with the Financial Services Authority. These initiatives aim to maintain market stability by increasing liquidity and ensuring greater compliance among financial participants.