Central Bank's Commitment to Support Government Finances

Jakarta - Indonesia's central bank, Bank Indonesia (BI), has announced plans to purchase an additional 150 trillion rupiah ($9.3 billion) of state bonds in the secondary market next year. This move is aimed at replacing around 100 trillion rupiah worth of maturing bonds that were initially acquired under a COVID-19 relief program. The decision was made in agreement with the government, reflecting a continued "burden sharing" arrangement between monetary and fiscal authorities.

Historical Context of the "Burden Sharing" Arrangement

From 2020 to 2022, BI had purchased tens of billions of dollars worth of government bonds, relinquishing interest payments on some to the government. This was part of a strategy to fund costs related to the COVID-19 pandemic. As per the government's financial report, approximately 100 trillion rupiah of these notes are set to mature in 2025.

Governor Warjiyo's Explanation

BI Governor Perry Warjiyo explained during a press conference following the regular monetary policy review meeting that BI has agreed to increase its purchases of government bonds in the secondary market. "As part of our monetary operation plans, these purchases can reach up to 150 trillion rupiah," Warjiyo stated, adding that the final figure could potentially be even higher. He emphasized that this plan aligns with the central bank's objectives for monetary operations and is a tool to expand money in circulation.

Collaboration Between Monetary and Fiscal Policymakers

Warjiyo highlighted that monetary and fiscal policymakers are currently working on the details of this plan, with further explanations to come. The new Indonesian President Prabowo Subianto's 2025 budget includes planned spending of 3,621.3 trillion rupiah, a 6% increase from the current year, with a deficit forecast of 2.53% of GDP.