Flooring Guide by Cinvex – Bank Indonesia (BI) is taking decisive action to combat recent pressures on the national currency. Governor Perry Warjiyo has unveiled seven strategic measures, which have received full backing from President Prabowo Subianto, designed to stabilize the rupiah against the US dollar amid ongoing global economic uncertainty.
These strategies were formally presented during a meeting with President Prabowo at the Presidential Palace on Tuesday, May 5. According to Governor Perry, the President expressed his support for these initiatives, which aim to fortify the rupiah and ensure long-term stability.
1. Active Market Intervention
To manage volatility, BI will continue its intervention strategy through the spot market and Domestic Non-Deliverable Forward (DNDF) transactions, both domestically and internationally. Governor Perry emphasized that Indonesia’s foreign exchange reserves, which stood at a robust USD 148.2 billion at the end of March, provide sufficient ammunition for these market operations.
2. Attracting Foreign Capital
In a move to bolster demand for the rupiah, BI and the government are relying on the Bank Indonesia Rupiah Securities (SRBI) to incentivize the return of foreign capital. This mechanism is expected to strengthen the currency’s position against the dollar by increasing investor interest in local assets.
3. Strengthening Monetary-Fiscal Coordination
BI continues to coordinate closely with the Ministry of Finance to purchase Government Securities (SBN) in the secondary market. Governor Perry noted that the central bank has already acquired IDR 123.1 trillion in SBN year-to-date, underscoring the tight alignment between fiscal and monetary policies.
4. Maintaining Liquidity
To provide a solid foundation for the rupiah, BI and the Finance Ministry are committed to ensuring that banking liquidity remains ample. The central bank is also maintaining a high growth rate for reserve money (M0), which recently reached 14.1 percent year-on-year, providing a stable supply of liquidity to the financial system.
5. Stricter Currency Purchase Regulations
BI is tightening access to US dollars in the domestic market. The purchase limit for cash USD will be reduced from USD 100,000 to USD 50,000 per person per month. Furthermore, the central bank is preparing a policy requiring an underlying transaction document for any purchase of US dollars exceeding USD 25,000.
6. Bolstering the Offshore Market
BI is enhancing the oversight and effectiveness of the offshore Non-Deliverable Forward (NDF) market. By allowing domestic banks to engage in offshore NDF sales, the central bank aims to increase foreign exchange liquidity, thereby contributing to broader currency stabilization.
7. Enhanced Surveillance
Finally, BI is working with the Financial Services Authority (OJK) to intensify monitoring of banks and corporations with high levels of foreign currency purchasing activity. Governor Perry affirmed that this collaboration with OJK Chair Friderica Widyasari is essential to maintaining the integrity and stability of the entire financial system.
Summary
Bank Indonesia Governor Perry Warjiyo has introduced seven strategic measures to stabilize the rupiah amid global economic uncertainty, with full support from President Prabowo Subianto. These initiatives focus on active market intervention, attracting foreign capital through Bank Indonesia Rupiah Securities (SRBI), and strengthening fiscal-monetary coordination through government bond purchases. The central bank also aims to maintain ample banking liquidity to provide a stable foundation for the national currency.
To further curb volatility, Bank Indonesia is implementing stricter regulations, including reduced monthly cash USD purchase limits and mandatory documentation for large foreign exchange transactions. Additionally, the bank is enhancing its offshore market oversight and intensifying surveillance on high-volume currency buyers in partnership with the Financial Services Authority (OJK). These coordinated efforts leverage Indonesia’s robust foreign exchange reserves to protect the rupiah’s value against the US dollar.