JAKARTA - Minister of Finance Purbaya Yudhi Sadewa plans to launch the Bond Stabilization Fund (BSF) as an instrument to maintain the stability of the government bond market.
Purbaya explained that the bond stabilization fund scheme has actually been around for a long time in the government environment, but has never been actively implemented.
"It's not a new thing. But it's never been implemented. It means it exists but it's dead. Actually it already exists but it's dead. I just want to live it," Purbaya told the media, Wednesday, May 6.
He emphasized that BSF is an internal initiative of the Ministry of Finance and is not within the framework of the Financial System Stability Committee (KSSK) like other stabilization policies.
According to him, this step was taken amid the trend of rising government bond yields since the beginning of the year which quickly had an impact on bond price declines, and could suppress the market, especially from the perspective of foreign investors.
He revealed that the yield, which had been in the range of 5.9 percent, continued to increase to reach around 6.7 percent, causing bond prices to decline.
"When I injected money, it was 5.9, it kept rising to 6.1, now 6.7 yield is rising, the price of bonds is falling," he said.
According to him, the decline in prices has the potential to cause losses for investors in the form of capital loss, and under certain conditions, this can encourage investors to adjust their portfolios, including selling bond holdings in the domestic market.
"Foreigners who have bonds here have capital losses. There are rules in investment institutions if the loss is so much, you have to cut it. So that's the micu," he said.
To anticipate this, he added that the government is trying to maintain the stability of bond prices through limited intervention in the market and is claimed to be effective in dampening the potential for foreign fund outflows.
"If I keep the bond below with a small amount, nothing will come out," he said.
Regarding funding, he said that the stabilization fund would come from the government budget and did not require special coordination with other institutions, communication with related authorities would still be carried out.
"The budget can be used for various things, right? We have a budget," he said.
However, he also added that coordination with the central bank would continue, especially in terms of technical implementation in the market.
"We don't know yet, but we will coordinate with the Central Bank. If yesterday we said that the coordination continued," he said regarding the amount of intervention.
Purbaya ensured that this program will be realized in the near future.
"Tomorrow it will be on the road," he said.
Through this policy, he hopes to maintain the stability of the financial market while supporting the strengthening of the rupiah exchange rate in the midst of global dynamics.
"I will try to help the rupiah in my own way," he said.
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