Ministry of Finance’s Corpu Talk, “Maintaining Indonesia’s Economic Sustainability amid Covid-19 Pandemic”
Nino Eka Putra ~ FEB UI Public Relations Officer
DEPOK, 20/7/2020 – The Financial Education and Training Center, the Fiscal Policy Agency at the Ministry of Finance and Bank Indonesia collaborated to hold the Ministry of Finance’s Corporate University Talk entitled “Maintaining Indonesia’s Economic Sustainability amid the Covid-19 Pandemic: Synergies between Fiscal and Monetary Policies” on Monday (20/7/2020).
Speakers at the online event were Febrio Nathan Kacaribu, Ph.D., Head of the Fiscal Policy Agency who is also a lecturer at FEB UI, Destry Damayanti, Bank Indonesia Senior Deputy Governor who is also an FEB UI alumna, and Dr. Muhamad Chatib Basri, former Minister of Finance (2013-2014) and FEB UI lecturer. The event was hosted by Dodi Septariza and moderated by Widjanarko Widyaiswara Utama. Rionald Silaban, Head of the Financial Education and Training Center, opened the talk.
Febrio Nathan Kacaribu, the first speaker, explained that Indonesia allocated Rp695.2 trillion for the financing of the handling of the Covid-19 pandemic. Of the total, Rp87.55 trillion was allocated for the health sector and Rp607.65 trillion for the national economic recovery (PEN) program. The monetary policy mix was also implemented to lower the Bank Indonesia (BI) key rate, increase the intensity of triple intervention, reduce the statutory reserves (GWM), and expand the types of underlying transactions. In addition, financial policies are aimed at easing the terms of credit/financing/provision of funds for MSMEs and restructuring MSME loan/financing.
The realization of Covid-19 handling and PEN programs is done by accelerating the formulation of regulations and simplifying administration, accelerating the implementation of programs to support the sustainability of the business world, and strengthening public communication to increase awareness, use of stimuli, and to gain feedback. Good governance in the implementation of the PEN program is ensured through synergies with policy makers, issuance of regulations and a revision of the State Budget, discussion and consultation with the House of Representatives (DPR), and monitoring through a special task force.
“The government works closely with BI to support the financing of Covid-19 handling and PEN through a burden sharing mechanism. Burden sharing is implemented by maintaining market integrity through the application of prudent fiscal and monetary policy principles, along with good governance (accountable and transparent). Of the total amount of the budget allocation, Rp397.56 trillion was disbursed for public goods financing, Rp177.03 trillion for non-public goods financing, and Rp328.87 trillion for other non-public goods expenditures. This burden sharing arrangement is only applied to the financing of the 2020 State Budget,” said Febrio.
The government’s medium-term policy directions for 2021 are efforts to escape the middle income trap by resolving fundamental problems (improving productivity, increasing competitiveness, quality of human resources, labor), accelerating recovery and strengthening reforms (such as health, social protection, education, industrial support, transfers to regions and village funds, taxation, and budgeting).
Destry Damayanti, Bank Indonesia Senior Deputy Governor, the second speaker, said that BI synchronized policies related to PEN with rupiah stabilization, interest rate cut, provision of liquidity funds, lower statutary reserves and rrelaxation of macroprudential policies, as well as cash and non-payment systems. Meanwhile, up to July 14 2020, BI has purchased Rp36.69 trillion worth of government securities (SBN) in the primary market through primary auction, greenshoe option and private placement.
According to Destry, BI Board of Governors agreed in a meeting on 15-16 July 2020 that policy focus is on the forecast for inflation that remains low, maintained external stability, and as further steps to encourage PEN during the pandemic. BI’s steps to implement the rupiah exchange rate stabilization policy in accordance with the fundamental value and market mechanisms will continue amid the continuing uncertainty on global financial markets. In addition, the emphasis on strengthening the synergy between monetary expansion and the acceleration of the government’s fiscal stimulus will continue.
Destry went on to say that BI also continues to strengthen coordination of policy measures with the government and the Financial System Stability Committee (KSSK) to maintain macroeconomic and financial system stability, including by providing funding for the Deposit Insurance Corporation (LPS) through a repo mechanism or the purchase of SBN owned by LPS. BI also continues to accelerate the digitalization of the payment system to accelerate the implementation of the digital economy and finance through collaboration between banks and fintech firms to expand MSME and public access to economic and financial services.
Muhamad Chatib Basri, the third speaker, said that according to a survey conducted by Saiful Mujani Research and Consulting (SMRC) on the demographic cluster, three income groups want the new normal to be postponed. They are people who earn less than Rp1 million per month (only 13%), Rp2 million (only 12%), and more than Rp4 million (24%). This means the low income groups want the new normal to be put in place, but the high income groups want to stay at home or the new normal to be postponed. In addition, those with tertiary education want the new normal to be postponed and those with primary, junior and high school education want the new normal to be put in place.
Meanwhile, the Organization for Economic Co-operation and Development (OECD) said in its report that two years from now, the global economy will not be returning to 2019 levels. This means that for Indonesia, not all export sectors can be a source of income. In addition, commodity prices are still flat. “So, we have to start from demand or fiscal. This is why burden sharing between the government and BI is highly required. Currently, PEN is expected to have a positive impact on the real and financial sectors so that we can bounce back after Covid-19,” Chatib concluded. (hjtp)
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