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VIRUS CORONA - JAKARTA. Indonesia unveiled new measures on Monday to stabilise its financial markets and support growth in Southeast Asia's largest economy, amid capital outflows linked to the coronavirus outbreak as it reported its first confirmed cases.
The central bank will increase market intervention, cut reserve requirements and relax rules for domestic non-deliverable forward (DNDF) transactions to support the rupiah and bonds, Bank Indonesia (BI) Governor Perry Warjiyo said.
Separately, Finance Minister Sri Mulyani Indrawati said import rules for raw materials will be eased as stocks in factories were low amid a trade slowdown due to the global spread of the coronavirus.
Read Also: Indonesia to ease imports rules for capital goods amid virus outbreak
The rupiah, which this year had been the best performing among emerging Asia currencies, fell 0.5% to 14,415 - its weakest since May 2019 - after Indonesia announced its first confirmed coronavirus cases.
The currency recovered to 14,230 following the new measures, while the stock index also trimmed losses.
"In Indonesia, we're taking this seriously. We assess from time to time so that the impact of COVID-19 to the stability of our economy can be mitigated," Warjiyo said, referring to the global outbreak caused by the virus.
He said the impact on Indonesia's economy would be less pronounced than countries like Japan, South Korea and Singapore.
The central bank would increase the volume of its "triple" intervention in the spot foreign exchange, DNDF and bond markets so investors "remain confident that BI is always in the market to do its job", Warjyo said.
The level of reserves in foreign currencies that banks must park at BI would be cut by 400 basis points (bps) to 4%, a measure that would pump $3.2 billion into the banking system starting on March 16, Warjiyo said.
A similar requirement for rupiah savings would also be cut by 50 bps for banks that lend to exporters and importers starting on April 1 and be effective for nine months, he said.
Read Also: Indonesia confirms first cases of coronavirus
BI will also allow domestic NDF transactions to be based on sales of government bonds by foreign investors, so long as the proceeds are placed in a rupiah saving account, Warjiyo said, arguing that some foreign investors were looking to reinvest once market volatility subsided.
Last month, BI cut interest rates by 25 bps, its fifth rate since May, to mitigate the economic impact of the virus outbreak. It also trimmed its 2020 gross domestic product growth outlook slightly to a range of 5.0%-5.4% from 5.1%-5.5%.
The government also announced a nearly $750 million stimulus package to support domestic consumption and tourism.
BI will also bring forward about 10 conferences initially scheduled for the second half of the year to stimulate economic activity, Warjiyo said.
