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The Central Bank Is Set To Purchase Government Bonds In Order To Stabilize The Rupiah In 2025, A Move That May Impose A Burden On Subsequent Administrations

Bank Indonesia (BI) is set to acquire over IDR 100 trillion in government securities (SBN) to be issued by the Ministry of Finance from the secondary market in 2025. This initiative is part of the central bank's and the government's efforts to stabilize the rupiah following a significant depreciation of the Indonesian currency, which fell below IDR 16,000 per US dollar this month. 

Several economists have expressed concerns regarding the risks associated with this strategy if not executed properly. For instance, there is a need to consider the implications of rising interest burdens and to ensure a sustainable long-term fiscal strategy. Furthermore, this approach may impose financial burdens on future administrations. 

Previously, BI Governor Perry Warjiyo indicated that discussions regarding the SBN purchase plan had taken place with Finance Minister Sri Mulyani Indrawati. Their meeting focused on the issuance of SBN in 2025 and BI's monetary operations for the upcoming year. "We have met bilaterally and reached a preliminary agreement. We concurred on the SBN issuance plan and the acquisition of SBN from the secondary market as part of our monetary operations," Perry stated during the announcement of the BI Governor's Board meeting results on Wednesday, December 18, 2024. 

The acquisition of SBN from the secondary market by BI will be conducted through market participants and via a bilateral debt switch mechanism with the government. This debt management strategy aims to replace short-term debt with new obligations, typically with longer maturities. 

The government will utilize the debt switch mechanism to settle maturing debt amounting to IDR 100 trillion. This figure is a result of a burden-sharing scheme with BI that was implemented to finance the response to the Covid-19 pandemic. The bilateral SBN exchange mechanism between the Ministry of Finance and BI has been previously employed, including in 2021 and 2022. 

Tag: Bank Indonesia SBN Stabilize The Rupiah In 2025 The Central Bank