Indonesia’s central bank ready to finance more fiscal deficit for COVID-19 fight

During an online seminar, Warjiyo said he and Indonesian Finance Minister Sri Mulyani Indrawati had agreed to accelerate budget deficit financing for responding to COVID-19 .

The BI and the finance ministry are in their final stage of agreement for the deficit financing scheme and they would work with parliament's finance commission and the Audit Board of Indonesia to ensure accountability, Warjiyo said.

He reiterated at the seminar that BI has scope to trim its main policy rate further.

Since the beginning of this year, BI has so far bought 40 trillion rupiah (2.83 billion USD) of government bonds directly in auctions. It has also purchased 166.2 trillion rupiah of bonds in the secondary market.

In total it has injected 614.8 trillion rupiah of liquidity into the financial system, including via bond buying operations, the governor said.

Indonesia’s fiscal deficit this year is expected to be 6.3 percent of its GDP, up from an initial plan of 1.8 percent, with the government forecasting a 10 percent drop in revenue and allocating nearly 50 billion USD for the COVID-19 budget.