Oum Samorn (right), the owner of Ramorn Pub in Mondulkiri province who pledges not to serve bush meat at his restaurant. LAY SAMEAN
Indonesian financial authorities are buying back government bonds and halting income tax, among other efforts, to restore confidence in the financial markets and soften the economic impacts of Covid-19.
Indonesia is preparing measures similar to those made during the 2008 global financial crisis, including buying back government bonds and halting income tax, to restore confidence in the financial markets and soften the economic impacts of Covid-19.
Financial authorities will guard the bond market to follow its fundamental value, Finance Minister Sri Mulyani Indrawati said on Tuesday, adding that the current circumstances had led to irrational market behavior.
“We have created a framework for bond stabilization to calm the market while Bank Indonesia also bought government bonds in the secondary market,” Sri Mulyani told reporters. “This will prevent excessive profit-taking and speculation during this unusual situation.”
Sri Mulyani said the recent dive in global markets as a result of plunging oil prices following a disagreement between oil giants Saudi Arabia and Russia and heightened Covid-19 fears had been extraordinary. Therefore, the government will move to prevent these sentiments from hurting the economy.
“Our monetary and fiscal authorities are working together, just like in 2008, to restore market confidence and rationality,” Sri Mulyani said.
In February, foreign investors sold Rp 33.6 trillion ($2.36 billion) in Indonesian stocks and bonds, as $5 trillion was wiped off stock markets around the world.
On Monday, the Jakarta Composite Index (JCI) plunged 6.58 per cent and closed the day at 5,136.81 points, the lowest level since December 2016. It has lost 18.46 per cent of its value year-to-date.
The Financial Services Authority (OJK) has allowed listed companies to buy back their shares at up to 20 per cent of their paid-up capital without a prior shareholders’ meeting in an effort to ease market volatility.
“This is as an effort to stimulate the economy and reduce the impact of the significantly fluctuating market,” the OJK said in a statement issued after Monday’s trading session closed in the red.
Sri Mulyani said the government was also planning to delay individual and corporate income tax collection to stimulate the economy.
“Based on our experience in 2008, we have prepared a mechanism for individual [and corporate] income tax, including how long it will be effective and for which sectors.”
The International Monetary Fund called on governments worldwide on Monday to join forces and roll out aggressive financial support for the coronavirus-infected global economy, including direct payments to workers and businesses.
Given the “acute shocks” caused to economies, consumers and businesses, IMF chief economist Gita Gopinath said, “policymakers will need to implement substantial targeted fiscal, monetary and financial market measures to help affected households and businesses”.
The measures could include “cash transfers, wage subsidies and tax relief” as well as interest rate cuts and financial market support by central banks, she added.
THE JAKARTA POST/ASIA NEWS NETWORK
