Indonesia's finance ministry is in talks with five state firms to seek a commitment from them to buy government bonds in the event of sudden outflows of capital from the market, an official said on Tuesday.
Agus Suprijanto, acting head of the fiscal policy office at the finance ministry, said discussions were still in the early stages, but the so-called bond stabilisation fund would help to maintain bond prices if a reversal in risk sentiment triggered capital outflows.
The five firms are Bank Mandiri , Bank Negara Indonesia and Bank Rakyat Indonesia , as well as pension fund Taspen and deposit insurance corporation LPS, he said.
"If there is a crisis or reversal, they are committed to buy back government bonds," he said, adding that the amount of funds prepared was still being discussed.
Indonesia, Southeast Asia's biggest economy, has been an investor darling this year, but officials are concerned that a tide of hot money could reverse and plunge the economy into crisis.
Bank Indonesia has already moved to encourage investors towards longer-dated paper by scrapping the sale of one- and three-month SBIs and creating a minimum 28-day holding period for the purchase of SBIs.
The government also has funds ready in the state budget to buy back bonds in the event of capital flight, said Suprijanto.
Strong economic growth and political stability have attracted investors to Indonesia, and foreign ownership of government bonds rose to 194.9 trillion rupiah ($21.56 billion) as of Dec. 21 -- almost double the 108 trillion rupiah of December last year -- a third of the total.
Indonesia has also studied the possibility of taxing capital inflows despite it being a less favourable option, Suprijanto said last month.Source: Reuters
Agus Suprijanto, acting head of the fiscal policy office at the finance ministry, said discussions were still in the early stages, but the so-called bond stabilisation fund would help to maintain bond prices if a reversal in risk sentiment triggered capital outflows.
The five firms are Bank Mandiri , Bank Negara Indonesia and Bank Rakyat Indonesia , as well as pension fund Taspen and deposit insurance corporation LPS, he said.
"If there is a crisis or reversal, they are committed to buy back government bonds," he said, adding that the amount of funds prepared was still being discussed.
Indonesia, Southeast Asia's biggest economy, has been an investor darling this year, but officials are concerned that a tide of hot money could reverse and plunge the economy into crisis.
Bank Indonesia has already moved to encourage investors towards longer-dated paper by scrapping the sale of one- and three-month SBIs and creating a minimum 28-day holding period for the purchase of SBIs.
The government also has funds ready in the state budget to buy back bonds in the event of capital flight, said Suprijanto.
Strong economic growth and political stability have attracted investors to Indonesia, and foreign ownership of government bonds rose to 194.9 trillion rupiah ($21.56 billion) as of Dec. 21 -- almost double the 108 trillion rupiah of December last year -- a third of the total.
Indonesia has also studied the possibility of taxing capital inflows despite it being a less favourable option, Suprijanto said last month.Source: Reuters
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