JAKARTA: The International Monetary Fund has recommended Bank Indonesia limit its 2022 direct purchases of government bonds to periods of market dysfunction, as Southeast Asia's largest economy begins to unwind pandemic-era economic stimulus.
"The IMF team supports the authorities' commitment to exit from monetary budget financing by the end-2022 target date, and further recommends confining further primary market purchases under the market mechanism this year only to periods of severe market dysfunction," Cheng Hoon Lim, the IMF's Indonesia mission chief, said in a press briefing for its so-called Article IV.
Some of the liquidity support has come in the form of government bond purchases in auctions and through private placement, to limit the government's debt interest expenses. IMF's Lim said Indonesia was in a good position to normalise policy and BI's liquidity absorption measure will help anticipate the US Federal Reserve's monetary tightening.
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