Bank Indonesia Steps Up Unconventional Moves With Budget Funding

Indonesia’s central bank ventured further into unconventional policy territory, agreeing to buy billions of dollars of sovereign bonds directly from the government to help finance the fiscal response to the coronavirus pandemic.

Bank Indonesia will help finance 574.4 trillion rupiah ($40 billion) of an expanded fiscal deficit. It will buy 397.56 trillion rupiah, or about $27 billion, of bonds directly from the government in private placements. The remainder will be purchased at auctions if there isn’t sufficient demand. It will return all the interest earned on the bonds bought directly through the private placing, and will partly bear the interest cost on the remainder.