Financial stability was maintained amid pressure

JAKARTA. Despite the possibility of domestic and external pressures disrupting Indonesia's economic performance, Finance Minister Bambang Brodjonegoro said that stability of the financial system was maintained.

"Based on the results of the assessment of the second quarter of 2015, the stability of the financial system and macroeconomics was maintained amid domestic and external pressures," Brodjonegoro, who is also the chairman of the Financial System Stability Forum (FKSSK), stated in a press conference after attending a meeting of the organization here on Thursday.

The meeting was also attended by Governor of Bank Indonesia Agus Martowardojo, Chairman of the Board of Commissioners of the Financial Services Authority Muliaman Hadad, and Chairman of the Board of Commissioners of the Deposit Insurance Agency Heru Budiargo.

According to Brodjonegoro, during the meeting, they agreed to strengthen policy coordination in accordance with the duties and authority of each member, with regard to exchange rate stability, the stock market and Indonesia's state securities market.

"The forum will increase alertness regarding pressures on financial markets and the exchange rate," he affirmed.

The weakening of the exchange rate did not reflect the fundamental value (undervalued), even though the rupiah depreciated due to the devaluation of the Chinese yuan, the minister pointed out.

Moreover, the pressure on the stock market and Indonesia's state securities market was a combination of external negative sentiment and performance of issuers.

"Therefore, FKSSK agreed to strengthen policy coordination to resolve problems in the financial markets and the weakening of the exchange rate," he remarked.

To overcome temporary pressures on the exchange rate, relevant authorities will implement a short-term policy.

Furthermore, the FKSSK will also strengthen policy synergies to maintain stability and economic growth, by increasing investment and people's purchasing power.

"To increase investment, members of the FKSSK have issued a policy to expedite spending and provide stimulus, to increase corporate investments and the competitiveness of domestic products and to speed up infrastructure development," he explained.

In addition, to maintain domestic consumption, members of the FKSSK have coordinated to provide incentives to increase people's purchasing power, ensure the availability of credit, and lower the price of goods and services.

"The availability of loans will be increased through macro- and micro-prudential policies," he noted.

With regard to the financial system safety net bill, the FKSSK urged the government and the parliament to finalize discussions on the bill posthaste.

Overall, the forum is optimistic about the prospects of the Indonesian economy in the second semester of 2015, including the stability of the exchange rate as well as the resilience of the financial markets and domestic financial institutions.

"Members of the FKSSK are committed to improving the policy mix in accordance with their respective authorities that are implemented appropriately," Brodjonegoro emphasized.