Economic stabilization mechanism is available

JAKARTA. The Finance Ministry’s fiscal agency head, Bambang Brodjonegoro, said the government had not yet activated the Bond Stabilization Framework (BSF) available to contain economic fluctuations.

“The BSF mechanism is already there but has not yet been activated because the government and Bank Indonesia's initiatives via direct loans are still proving effective at stabilizing the government bond [SUN] markets,” Bambang said in Jakarta on Tuesday evening.

The BSF is one of the government's mitigation measures in the form of short- and long-term programs to anticipate the potential impact of a crisis on domestic treasury notes (SBN).

The short-term measure to tackle any negative impact focuses on SBN purchasing in the secondary market.

Meanwhile, the establishment of a “bond stabilization fund” is the long-term measure that can be used to contain a crisis under the BSF scheme.

Bambang said Bank Indonesia (BI) was still playing an active role in stabilizing the SUN market so that possible fluctuations triggered by capital flow reversals were constrained.

“BI is being active in helping to ensure that the SUN market remains stable. There is an increase of 'yield' but that is not problematic for the government’s state budget financing. Our financing capacity is still well-maintained,” said Bambang.

He added that the one thing the government could do to offer market players greater certainty was by reducing the current account deficit in the third quarter of this year. (ebf/The Jakarta Post)