Perry Warjiyo0:10
Yes. One thing I must explain before I start is that, in accordance with the law and current practice, policy decisions are made at every monthly Board of Governors meeting. The last one was on May 19-20, when we raised the BI rate by 50 basis points. Remember that. Now, of course, when we made that decision, there were projections. Every week, every Tuesday, Bank Indonesia evaluates how the implementation is going, whether the projections are on track or not. In various evaluations today, we see that the weakening of the rupiah has exceeded our earlier projections. And therefore, the title today is 'Follow-up Policy Measures to Strengthen Rupiah Exchange Rate Stability.' The essence is five decisions we made today. First, raising the BI rate to 5.5%, a 25 basis point increase, so that the rupiah becomes more stable and strengthens, and of course, to ensure inflation projections for this year and next year remain at 2.5% plus or minus 1%. At the same time, this BI rate increase is to attract foreign portfolio investment inflows. Because since April-May, SRPI has already seen inflows. In June, government bonds and stocks also saw inflows. SRBI saw outflows, sorry, SRBI saw outflows. So we need to raise the rate to strengthen and stabilize the rupiah and keep next year's inflation within target. Second, besides the BI rate, we also adjusted SRBI instruments upward to attract inflows. Because one cause of the rupiah's weakening is outflows in portfolio investment. With the increase in BI and SRBI rates, inflows are expected to rise again and support the rupiah's strengthening. That's number two. Third, providing incentives for hedging swaps. Foreign investors who come in and buy government bonds, stocks, or SRBI can use these as underlying assets. They can go to banks. There is currently something called a hedging swap. They bring it to the bank, and the bank can pass it on or pass it through to BI. It's called an incentive, providing an incentive for hedging swaps. We have set the size at 10%. So the swap price for this hedging swap is 10% cheaper than the regular swap price. We have a regular swap price. A swap is an exchange of foreign currency to rupiah to cover hedging. That was number three. Number three is providing a 10% incentive for hedging swaps, which also strengthens the appeal. The appeal is not just higher interest rates, but also a cheaper price for hedging, which also compensates for some of the other costs or obligations for investors to hedge. That was number three. What is number four? That is reactivating the auction window for repurchase agreements to meet rupiah liquidity needs for the money market and banking sector. So, to meet liquidity needs, banks can bring their government bonds or SRBI to BI, and we can provide what is called a repurchase agreement. Yes, like a pawn, and we extend the tenor to 3 months, 6 months, 9 months, 12 months. So for 3, 6, 9, or 12-month needs, banks can use securities, whether government bonds or SRBI, in what we call a repurchase agreement transaction. So, with this, our monetary expansion so far has been, among other things, through purchasing government bonds from the secondary market. Now, of course, by using repo, the need to purchase government bonds can be reduced somewhat. The fifth is to increase the intensity of foreign exchange and monetary operations, as I mentioned earlier, both through foreign exchange intervention and for the rupiah through SWI auctions twice a week. So those are five follow-up measures to strengthen the rupiah exchange rate. Once again, this is because every week we evaluate the implementation of the policies decided at the monthly meeting. So, because there was a rupiah weakening that exceeded our projection, we are taking follow-up measures to stabilize the rupiah exchange rate. What were they? Number one, the BI rate increased by 25 basis points to 5.5%, which increases its appeal. Second, we also raised the SRBI rate to increase its appeal. Third, for hedging, we made it cheaper with a reduction of about 10%, which will increase appeal. Why 10%? It is comparable to one of the obligations of foreign investors to pay taxes. If foreign investors buy government bonds or SRBI in Indonesia, they are subject to an average tax of about 10%, among other obligations. So this is more competitive. Then number four is for the adequacy of money market and domestic banking liquidity, we have reactivated the weekly repo auction. Banks can come to BI and use underlying assets for their liquidity needs. Number five is the intensity of rupiah and foreign exchange monetary operations, as I mentioned. Thank you.
Thank you. I have a possibility... Sir, if the position of Indonesia's foreign reserves is no longer sufficient... It is more than sufficient. Here's how it works: Bank Indonesia always measures how much reserves are sufficient. There is an indicator issued by the IMF, internationally, called the Adequacy of Reserve Assets. We measure it, simply put, as how much foreign currency reserves are available to cover a deep rupiah weakening. We measure that, and currently, it is still more than 115%. So it is still more than sufficient, in addition to covering around 6 months of imports. So don't worry, the amount of reserves is more than sufficient. Thank you.
