The Indonesian government and central bank on Tuesday night unveiled an emergency 10-point package to “protect the stability of the financial system and national economy” in response to increasing pressure on the country’s battered currency and stock market.
Sri Mulyani Indrawati, the finance minister, said the government and Bank Indonesia would start buying back government bonds on Wednesday. In addition, state-owned enterprises have been told to repatriate their foreign currency earnings while the authorities will exercise bilateral currency swap arrangements with the central banks of China, Japan and South Korea if necessary.
Exporters will also be allowed access to government-funded, post-shipment financing, and the export tax on crude palm oil – of which Indonesia is the world’s largest producer – will be cut to zero from 2.5 per cent “to keep exports moving”.
The announcement follows heavy selling of the rupiah in the past three days. On Tuesday, it quickly fell by almost 9 per cent to Rp11,800 to the US dollar, down almost 30 per cent in the last month and its lowest level since April 2001, before rallying on Bank Indonesia intervention to close at Rp10,900.
The Indonesian stock market’s benchmark index bucked the regional positive trend on Tuesday and fell 4.7 per cent to 1,111.3, its lowest level since 2005 and down 60.8 per cent since it peaked in January.
Market operators said the package was “unremarkable” but expressed relief there were no negative surprises.
James Bryson, of HB Capital Partners in Jakarta, said: “There’s nothing negative but this is not a catalyst to change the underlying problems, namely the Bakrie empire, the weakening bond market, tight liquidity and an aversion to emerging market risk.”
The business empire of the family of Aburizal Bakrie, Indonesia’s powerful welfare minister, is casting a shadow over the market and foreign sentiment to Indonesia.
Share trading in three companies it controls, including the large thermal coal producer Bumi Resources, have been suspended for more than three weeks while the holding company, Bakrie & Brothers, tries to sell enough assets to repay $1.2bn in loans that were guaranteed with shares when they were worth several times their current value.
Indonesian government bonds have been the worst performers among 10 Asian nations in recent weeks, according to HSBC.
Mrs Sri Mulyani said the bonds were affected by “negative perception of a slowdown”. She said: “We will buy back the bonds to show that the government and Bank Indonesia cares for the quality and price of the bonds.”