REPUBLIKA.CO.ID, JAKARTA -- Governor of Bank Indonesia Perry Warjiyo said he had no intention of imposing tax on yields of foreign capital flowing in or flowing out. Perry told reporters here on Friday, he never had a discourse about plan to issue such tax regulation.
He said he only cited that in a number of other countries tax was imposed on foreign capital in a bid to curb capital outflows when their economic stability was jolted by external pressures. "Therefore, I repeat it is not a plan or initiative to be taken by Bank Indonesia at present," he said.
Since early this year, Indonesia has indeed been under heavy pressure of capital outflow on expectation of an increase in the fund rate of the U.S. Federal Reserve and a rise in U.S. bond yields. The rupiah value was once shrank by as much as 4.5 percent from January to May 21, 2018.
However, after the Central Bank raised its benchmark interest rate twice each by 25 basis point in two weeks, rupiah began to regain some of its lost value against the U.S. dollar to reach a level below 14,000 per dollar.
There was an inflow of around Rp13 trillion since May 24, 2018 especially to state securities, bonds and shares, Perry said. "We will apply a pre-emptive and ahead of the curve policy and frontloading," he added.
Earlier, Perry said the pressure of foreign capital outflows that would weaken rupiah would still shadow the domestic financial market. The pressure of capital outflow would also come with the improvement of the U.S. economic data and from the expansive U.S. fiscal policy which raises the yield of U.S. 10-year treasury bill.
Perry, who took over as new Governor of Bank Indonesia only on May 24, 2018 has repeatedly pledged to adopt a preemptive policy and to remain ahead of the curve. "Our short term focus through monetary policy is to stabilize exchange rate," he said.
Perry also pledged to shortly issue a macroprudential policy through relaxation of House Ownership Credit. This year Bank Indonesia predicted the country's economy would grow 5.2 percent year-on-year.
Finance Minister Sri Mulyani Indrawati said the government and Bank Indonesia and other members of the Financial System Stabilization Committee (KSSK) are ready to adopt a firm policy to anticipate external pressure that could disrupt economic stability.
The Finance Ministry also said it will coordinate with Bank Indonesia in the state bond market to keep the yield of bonds at a rational level. "All components of KSSK will increase alertness and we would not hesitate to act," the minister said.
Ikuti Whatsapp Channel Republika