Indonesia: Government mulls issuance of recovery bonds to insure against layoffs

  • The government is mulling over a plan to issue recovery bonds – extraordinary debt notes that would allow Bank Indonesia, the country’s central bank, to inject cash in an effort to help local businesses survive economic shocks from the Covid-19 pandemic and avoid firing their workers.
  • Susiwijono, the secretary of the Coordinating Ministry for Economic Affairs, said the government would sell the recovery bonds to Bank Indonesia and to private investors soon. The government will then use the proceeds for special loans to local businesses.
  • “The government is exploring the idea of issuing a new form of bonds, called the recovery bond. The proceeds will be channeled through special loans that are designed to be as unrestricted as possible so entrepreneurs could kick start their businesses,” Susiwijono said.
  • Current laws prevent Bank Indonesia from buying government bonds directly from the government. The central bank can only purchase the instruments in the secondary market.
  • Susiwijono said the government plans to issue a regulation-in-lieu-of-law (Perppu) to remove the limitation.
  • Finance Minister Sri Mulyani Indrawati said the government had even prepared for a worst-case scenario in which a prolonged pandemic grinds the Indonesian economy to a halt, resulting in a 0% growth in 2020.

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