IMF Asks BI to End State Budget Financing

Topic

The International Monetary Fund (IMF) asked Bank Indonesia (BI) to end their involvement in financing the State Budget (APBN) starting this year. This is in line with the commitment of BI and the Indonesian government to end the so-called burden-sharing of financing the 2020-2022 state budget deficit.

According to the Assistant Director of the Western Hemisphere Department of the IMF, Cheng Hoon Lim, Bank Indonesia should end the purchase of Government Securities (SBN) in the primary market this year and recommend intervention through market mechanisms.

"We support the commitment of the Indonesian authorities to exit the budget financing according to the final target of 2022, and recommend limiting purchases in the primary market further under the market mechanism this year, in anticipation of a period of severe market dysfunction," he said in an official statement, Wednesday.

The IMF also appreciates Bank Indonesia, which will gradually reduce excess banking liquidity this year, although the risk of rising inflation remains. "If faced with an adverse monetary policy spillover, BI must maintain monetary policy space by providing greater flexibility in the rupiah exchange rate," he said.

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