Indonesia

PT Garuda Indonesia needs at least $1 billion of additional funds to cut debt and stay afloat, as the government says it could give up its majority control of the troubled flag carrier, Bloomberg News reported. Garuda is currently in talks with creditors to restructure $6.3 billion worth of debt and expects to reach an agreement in the second quarter of 2022, according to Kartika Wirjoatmodjo, a deputy minister at Indonesia’s State-Owned Enterprises Ministry.

Indonesia's central bank kept its policy rates steady at record lows on Tuesday to support a tentative recovery, even as economic activity picked up in recent months thanks to rebounding consumption and robust commodity exports, Reuters reported. Bank Indonesia (BI) held the benchmark 7-day reverse repurchase rate steady at 3.50% for the eighth month, saying the decision was in line with the need to support the recovery while keeping the rupiah stable. All 29 analysts in a Reuters poll had expected the move.

Indonesia is preparing a backup plan for flag carrier PT Garuda Indonesia if it fails to reach a deal with creditors, including the option of upgrading air charter PT Pelita Air Service to a scheduled airline, Bloomberg News reported. The course of Garuda’s current talks with creditors hinges on a court decision on a debt petition against the airline, with the ruling set to be announced Thursday, Kartika Wirjoatmodjo, a deputy minister at the State-Owned Enterprises Ministry, said by text message on Tuesday.

Indonesia's central bank will purchase government bonds worth up to 439 trillion rupiah ($30.46 billion) in 2021 and 2022 to provide cheaper financing for the government's COVID-19 relief measures, senior officials said, Reuters reported. The fiscal deficit financing scheme is similar to an agreement Bank Indonesia had with the finance ministry last year to fund ballooning health care and welfare bills amid the pandemic, which authorities said was a one-off measure. Investors and economists have raised concerns about the scheme's effects on inflation and the rupiah.

Indonesia’s central bank left its benchmark interest rate at a record low to protect the currency, and said it had formulated a plan to deal with eventual U.S. policy tightening, Bloomberg News reported. Bank Indonesia kept the seven-day reverse repurchase rate at 3.5% on Thursday. Interest rates have been on hold since February’s 25-basis point reduction, and are widely expected to stay at this level throughout 2021.

Indonesia's trade surplus is expected to show an expansion in July after the government imposed mobility restrictions to control a spike in COVID-19 cases, squeezing exports and imports, a Reuters poll showed on Friday. Southeast Asia's biggest economy has been enjoying an export boom on the back of high commodity prices, allowing for a trade surplus every month since May of 2020. The median forecast of 10 analysts in the poll was for a July trade surplus of $2.27 billion, up from the previous month's $1.32 billion.

Slow stimulus spending threatens Indonesia’s recovery as smaller businesses that are the backbone of the economy have been kept waiting for much-needed funds to weather an extended lockdown, Bloomberg News reported. Only about 30% of more than 186 trillion rupiah ($13 billion) of combined national and provincial government aid has yet been disbursed for micro, small and medium-sized enterprises, Finance Ministry data show.

Flag carrier Garuda Indonesia (GIAA.JK) will return nine leased Boeing 737 800NG aircraft ahead of schedule, as part of an agreement to end a bankruptcy lawsuit, the company's chief executive Irfan Setiaputra told Reuters on Monday. Garuda and its lessor, Aercap Ireland Limited, signed a global side letter agreement on July 28 to stop legal proceeding, following Aercap's bankruptcy lawsuit in June at the New South Wales Supreme Court, Garuda said separately in a stock exchange filing.

Indonesia’s finance minister expects the budget deficit to stay elevated next year as the nation’s worst coronavirus surge hampers the recovery and efforts to boost state revenue, Bloomberg News reported. The fiscal shortfall could reach 4.7%-4.8% of gross domestic product in 2022, Finance Minister Sri Mulyani Indrawati told Bloomberg Television’s Haslinda Amin. That’s near the top end of the government’s 4.5%-4.85% projection. “We’ll try very hard to return to fiscal discipline in 2023. But at the same time, we’ll also be very pragmatic,” Indrawati said.