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Indonesia cuts reserve ratios to boost liquidity as rupiah falls

Bloomberg News - March 2, 2020

Arys Aditya – Bank Indonesia lowered banks' reserve requirement ratios, seeking to shore up liquidity after concerns over the economic impact of coronavirus triggered a selloff in the nation's stocks, bonds and currency.

The foreign-exchange reserve requirement ratio for banks will be cut to 4%, from 8% previously, Bank Indonesia Governor Perry Warjiyo told reporters Monday. The cut, which is expected to add $3.2 billion in additional liquidity, is effective from March 16, he said.

Reserve requirement ratios for banks engaged in trade financing will be lowered by 50 basis points from April 1, for a period of nine months, Warjiyo said. The move is aimed at lowering costs for banks engaged in imports and exports, Bank Indonesia said in a statement.

The monetary authority also pledged to continue its "triple market intervention" to stabilize the currency and bonds, and said it will continue to coordinate with the government and relevant authorities to maintain economic stability, support growth and accelerate reforms.

The latest measures add to a 25-basis-point cut in the key interest rate on Feb. 20 and about $750 million in fiscal stimulus, announced last week by Finance Minister Sri Mulyani Indrawati, to help sectors hit by the coronavirus outbreak. Indonesia reported its first confirmed cases of the virus Monday.

The rupiah erased losses of as much as 0.6% after the announcement of the RRR cut, and traded 0.4% higher at 14,260 to the dollar. The currency slumped 4.6% last month to end as the worst performer in Asia. The benchmark Jakarta Composite Index of stocks pared losses.

Source: https://www.bnnbloomberg.ca/indonesia-cuts-reserve-ratios-to-boost-liquidity-as-rupiah-falls-1.139851