Photo: Disinfectant sprayers ready for use in Purwokerto, Central Java, Indonesia, on March 31, 2020. Untung Subagyo/Shutterstock

Islamic Finance

COVID-19: Indonesia imposes large-scale social restrictions, introduces 405.1 tln rupiah financial crisis plan

Indonesia’s President Joko Widodo on Wednesday (Apr 1) announced 405.1 trillion rupiah ($24.65 billion) in financial assistance and economic stimulus as large-scale social restrictions kick in to curb the spread of the novel coronavirus.

Pandemi Covid-19 bukan hanya membawa masalah kesehatan masyarakat tetapi juga implikasi ekonomi yang sangat luas. Karena itulah, saya menandatangani Perppu tentang Kebijakan Keuangan Negara dan Stabilitas Sistem Keuangan.

— Joko Widodo (@jokowi) April 1, 2020

With the COVID-19 declared a public health emergency, the government will issue a regulation in lieu of law (Perppu) that will allow it to take “extraordinary” measures to ensure the health of the public and secure the national economy and stability of the financial system.

The Perppu will allow for additional spending that will widen the budget deficit beyond the current legal limit of 3% of GDP, for three years. This year’s fiscal deficit is expected to hit 5.07% of GDP.

Menghadapi wabah Covid-19 ini, pemerintah menetapkan status kedaruratan kesehatan masyarakat. Untuk mengatasinya, opsi yang kita pilih adalah pembatasan sosial berskala besar atau PSBB, sesuai UU No 6 Tahun 2018 tentang Kekarantinaan Kesehatan.

— Joko Widodo (@jokowi) March 31, 2020

The 405.1 trillion rupiah financial crisis plan is earmarked for four main categories: 75 trillion rupiah will go to the health and medical sector, 110 trillion rupiah will serve as a “social safety net”, industries affected are allocated 70.1 trillion rupiah, and 150 trillion rupiah goes to business recovery programmes.

Indonesia’s economy is expected to grow by 2.3% this year under the government’s baseline scenario, or contract by 0.4% in the worst case scenario.

In a 41-page document accompanying the press conference on Wednesday, the finance ministry said the rupiah will range from 17,500 to 20,000 to the dollar under the worst case scenario.

© 2020 All Rights Reserved