Indonesia has a ‘surprising’ way to fund a larger government deficit — but its currency suffers
2020-08-21 09:20:53 source：CNBC
August 20, 2020
The Indonesian rupiah is the worst-performing Asian currency so far this year — and that weakness stems from the government’s decision to have the central bank partly fund its expanding budget deficit.
The “debt burden sharing” arrangement between the government and the central bank, Bank Indonesia, involves the latter buying 397.6 trillion Indonesian rupiah ($26.97 billion) worth of bonds. That debt, issued by the government, will help to finance a larger budget deficit resulting from increased spending to fight the coronavirus.
Such a program, also known as debt monetization, is likened to an unconventional tool called quantitative easing that, until recently, has only been used by major central banks in developed economies such as the U.S. and Europe.
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