BI Boss: Policy Mix Is The Key To Encouraging Sustainable Growth

BI Governor Perry Warjiyo (Photo: dock. Antara)

JAKARTA - Bank Indonesia (BI) emphasizes the importance of a policy mix to encourage sustainable growth in the face of turmoil and global conditions that have not returned to conditions before the COVID-19 pandemic.

This was conveyed by BI Governor Perry Warjiyo in the series of International Monetary Fund and World Bank (IMF-World Bank) Annual Meetings, including the fourth Central Bank of the G20 (FMCBG) meeting, which was held on October 10-15, 2023 in Marakesh, Morocco. The meeting was also attended by Perry and Indonesian Finance Minister Sri Mulyani Indrawati.

"The use of the central bank's policy mix does not rely on just one policy instrument but combines various policies, namely interest rate policies, macroprudential policies and exchange rate stability policies," said BI Governor Perry Warjiyo quoting Antara.

On that occasion, Perry explained Indonesia's strategy in dealing with inflationary pressures that came from supply and in terms of demand with strong coordination between the monetary and fiscal authorities.

He also highlighted the importance of efforts to overcome global conditions that are fragmented in various ways, including opening investment opportunities, downstreaming to increase added value of natural resources, and continuing to encourage the development of micro, small and medium enterprises (MSMEs) by developing cross-border payments to increase the relationship between MSMEs and the wider market.

As a form of international solidarity to help low-income countries and the commitment of G20 members, BI expressed its ability to support the IMF program for poverty alleviation and Growth Trust by contributing to the program of SDR 26 million which will be fulfilled from the interest collection of BI deposits placed in the IMF.

The assistance aims to help low-income countries achieve economic stability to reduce poverty, which is given, among others, to African countries as well as several constituency member countries of the South East Asia Voting Group (SEAVG) such as Laos, Tonga and Nepal, where Indonesia is a member.

This contribution is expected to show Indonesia's role in contributing to the resilience of the global economy, which ultimately has the potential to have a positive impact on the national economy.

Currently, the global economy is showing strengthening, but recovery is still slow and unbalanced. Global activity also has not returned to its pre-pandemic level.

There is also widespread growth divergences in various regions as well as challenges that continue to arise ranging from long-term consequences of COVID-19, war in Ukraine and increasing geoeconomic fragmentation, the impact of strict monetary policy in order to overcome inflationary pressures, reduced fiscal stimulus due to the high debt level, and implications of extreme weather.

In responding to this global condition, the Ministers of Finance and the Governor of the Central Bank will soon agree on a Global Policy Agenda which raises the theme of building prosperity and shared resilience.

As an effort to maintain stability and improve welfare, policymakers are expected to focus on restoring inflation according to targets, maintaining financial stability, rebuilding fiscal buffers, and encouraging sustainable and inclusive medium-term growth.

Furthermore, in an effort to strengthen collective resilience, the IMF conveyed the need for joint efforts to encourage strengthening the global financial safety net to help member countries in need and strengthening the IMF's capacity in providing surveillance, financing and providing relevant technical assistance to member countries.

Then at the upcoming G20 meeting, the Ministers of Finance and Governors of the Central Bank of G20 countries are scheduled to discuss various challenges that arise from uneven and divergent economic prospects with high core inflation challenges, rising burdens on loan interest payments for poor countries, as well as extreme weather events, which have limited policy space, especially for low- and middle-income countries.

Furthermore, the G20 countries will also discuss topics related to the potential and risks of crypto assets for macroeconomic and financial stability and efforts to overcome them.

To answer these challenges, the G20 countries are committed to broadly encouraging improvements to the welfare of the community, among others, by emphasizing the importance of continuing efforts to improve sustainable finance, cross-border payment systems and inclusive finance.