(Reuters) – Indonesia’s central bank’s credibility with investors remains intact following parliamentary proposals to reform its mandate, but adjustments will need to be carefully addressed to avoid tensions in its sovereign rating, S said Friday.
“Communication and implementation of policy adjustments will be determinants of BI’s credibility in the future,” He told Reuters Andrew Wood, the agency’s sovereign debt analyst for the country.
“If investor confidence in Indonesia’s economic policy is adversely affected, this can have implications for economic markets, potentially weakening economic flexibility and sovereign rating. “
Indonesia’s bonds, rupees and stocks have been affected this month by recommendations to the government to give ministers more influence in Indonesian Bank (BI) policy-making.
In an effort to calm nerves after a series of interventions to the currency, the bank kept interest rates on Thursday and under pressure that President Joko Widodo and Finance Minister Sri Mulyani Indrawati had pledged to maintain their independent policies.
Wood said the proposals had led to dramatic spikes in financing prices due to “the Bank of Indonesia’s accumulated credibility over the years and the patience of investors for competitive actions in the face of the pandemic. “
S
S
Indonesia, Southeast Asia’s largest economy, is sinking into recession and has the number of coronavirus deaths in the region.
Wood said the country’s debt score could be put under increased pressure in the event of a longer economic recession over the next two years.
(Shashwat Awasthi informs Bengaluru; edited through Patrick Graham, Saumyadeb Chakrabarty and Shounak Dasgupta)
Subscribe
Sign up for our news explosion.