Maintaining Indonesia's Economic Stability, Bank Indonesia Prepares Global Risk Mitigation Steps

Illustration. (Photo: Doc. Antara)

JAKARTA - Head of Economic Policy and Monetary of Bank Indonesia (BI) Firman Muchtar said his party had prepared various steps to mitigate global risks to maintain the stability of the Indonesian economy.

The global risks include the Russia-Ukraine war, geopolitical tensions in the Middle East, the turmoil of US monetary policy, and the U.S. fiscal deficit that is still swelling.

"We do it preemptively, we mitigate to maintain economic growth," said Firman during the 2023 BNI Investor Daily Summit in Jakarta, quoted from Antara, Wednesday, October 24.

One of BI's main focuses in preparing mitigation steps is maintaining price stability in order to reduce the possibility of increasing imported inflation.

BI is wary of the possibility of global risk of transmitting with increased imported inflation.

"Inflation is still the main target of BI's price stability, that mandate is what we want to maintain so that inflation continues to increase," explained Firman.

In addition, BI is also trying to mitigate the price of volatile goods (volatile food), especially rice commodities.

With these efforts, BI targets inflation targets in 2024 to be lower than in 2023, which is 2.5 plus minus 1 percent of the 3 plus minus 1 percent.

Not only in terms of imported inflation, BI also prepared mitigation steps in terms of exchange volatility. This step is carried out by intervening in the market, including through state securities (SBN).

The central bank also strengthens the issuance of Bank Indonesia Securities (SRBI). Firman explained that the issuance of SRBI has two goals, namely as a monetary instrument and is part of the deepening of the financial market.

"So, the assets used for securities are underlying from SBN BI. Hopefully, this is part of an effort to support the stability of the value of the rupiah," said Firman.

The next mitigation step is to relax the buffer for the macroprudential liquidity policy (KLM) from 6 percent to 5 percent.

The goal is to provide space for domestic banks to continue to channel additional credit amid uncertain conditions.