Indonesia: Bank Indonesia says S&P outlook cut not a reflection of fundamentals

  • S&P Global Ratings’ downgrade of Indonesia’s outlook is not a reflection of fundamental economic problems, central bank Governor Perry Warjiyo said, stating that policy steps taken in response to the coronavirus pandemic will help to restore the nation’s financial trajectory.
  • The comments from the Bank Indonesia chief come after S&P cut its outlook for the nation to negative from stable, while affirming its long-term foreign currency debt rating at BBB, the second-lowest investment grade score.
  • The change was to reflect “additional downside risk to the government’s fiscal and external metrics” from the pandemic, S&P said on 17 Apr 20.
  • “The lingering economic and financial uncertainty is a global phenomenon and Indonesia is one of many countries that have taken policy responses in the area of fiscal, monetary and financial policy to mitigate the negative impact of the spread of COVID-19,” Perry wrote in a statement.
  • Turning to unconventional tools, Bank Indonesia may start buying sovereign bonds directly from the government as early as next week (27 Apr 20) – the first time it would be doing so.
  • The central bank is in the final stages of completing an agreement with the Finance Ministry that will allow it to buy rupiah-denominated bonds as a non-competitive bidder in the primary market.

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