Jakarta (ANTARA News) - Bank Indonesia (BI) Acting Governor Darmin Nasution said the monetary policies package the central bank had issued recently was not meant to put restrictions on the free foreign exchange or capital flows.

"The policies are not aimed at controlling capital inflow. Indonesia remains within the free-flow capital corridor which it has consistently maintained. The policies will only support the continuity of macroeconomic stability and strengthen the momentum of recovery," he said here on Wednesday.

Darmin said the policies were made to respond to and anticipate various domestic and global financial market dynamics and expected to be able to increase the effectiveness of transmission of monetary policy, strengthen financial system stability and shore up the financial market.
 
The central bank on Wednesday issued six policies namely extension of the corridor of inter-bank money market overnight interest rate to be implemented as of June 17, 2010, a minimum one month holding requirement for Bank Indonesia Certificates (SBI) as on July 7 and addition of non-securities monetary instruments in the form of term deposits as of July 7 to absorb liquidity without underlying securities.

The others are improving provisions on the Net Capital Position (PDN) as of July 1, issuing nine-month and 12-month SBIs to be implemented in the second week of August 2010 and the second week of September 2010 and implementing a tripartite mechanism for repurchasing of state debentures (SUN) to be implemented in 2011.

Regarding the prohibition to sell SBI before a month or 28 days of holding Darmin said the policy was produced because investors tended to sell the securities due to seeing negative sentiment in the global money market.

"Some of the new policies linked to SBI would be significant to reduce or eradicate inflow of funds so that they would not immediately flee just upon hearing negative sentiment in the market. Investors must at least hold the SBI a month before they could sell it. They could conduct a repo but only with BI upon certain cost," he said.

Darmin said he hoped the policy could reduce volatility of the rupiah and the speed of incoming and outcoming flows of funds in the SBI.

"The policy was issued just as foreign holdings of SBI was low now namely only Rp33 trillion of total SBIs worth Rp270 trillion. So to investors who fled Indonesia since May please reconsider if they wish to enter again," he said.

Darmin said BI had already calculated the impact of the new policy which actually did not close the door for capitals to enter but which only made investors to calculate again carefully if they wish to invest in the country.(*)

Editor: Heru
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