Market Uneasy over Burden Sharing Policy

Bank Indonesia’s (BI) decision to revive the burden sharing scheme with the Ministry of Finance to support President Prabowo Subianto’s priority programs—such as housing development and strengthening village cooperatives—has unsettled the market. Many observers are now questioning the extent to which the central bank’s independence remains intact.

The plan was first revealed during BI Governor Perry Warjiyo’s presentation with Commission IV of the Regional Representative Council (DPD) on Tuesday, which was also attended by Finance Minister Sri Mulyani Indrawati. The announcement came as a surprise to investors.

The impact was immediately visible in domestic asset prices, which weakened despite global sentiment supporting emerging markets. The rupiah, for instance, depreciated for two consecutive days in the spot market until Thursday’s close, though within a limited range. Meanwhile, government bond (SUN) yields climbed higher.

“This movement reflects a negative reaction to the burden sharing policy, though investors are taking a cautious stance as the announcement came unexpectedly,” wrote Mega Capital analysts Lionel Priyadi, Nanda Rahmawati, and Muhammad Haikal.

Foreign investors quickly trimmed their holdings in both equities and government securities (SBN). According to Finance Ministry data compiled by Bloomberg, as of September 3, 2025, foreign ownership in SBN fell by Rp9.2 trillion to Rp944.6 trillion. This was a sharp reversal from the previous week, when foreigners had increased their holdings by Rp5.65 trillion amid political unrest and looting across several regions. Between July and August, they had in fact accumulated Rp35.17 trillion worth of SBN.

In the equity market, foreigners recorded seven consecutive days of net selling since protests escalated. In this short trading week alone (up to September 4), they booked net sales of US$254.1 million, or about Rp4.17 trillion.

They also withdrew from Bank Indonesia’s hot-money instrument, the Rupiah Securities (SRBI). BI data show that between September 1–3, foreign investors posted net sales of Rp5.29 trillion in SRBI. In total, foreign outflows across multiple asset classes reached Rp18.66 trillion.

Questions Over BI’s Independence

The burden sharing policy has reignited the long-standing debate over BI’s independence. In its official statement, BI confirmed its agreement to purchase government bonds in the secondary market and shoulder part of the interest costs tied to housing and cooperative programs.

“Fiscal and monetary policy coordination to boost economic growth remains grounded in prudence while upholding market discipline and integrity,” BI stated.

Governor Perry explained that the cost-sharing arrangement would cover 2.9% of interest payments for housing programs and 2.15% for cooperative schemes. The formula used is the 10-year government bond yield minus the return on government deposits in banks, with the remainder split equally.

Yet, economists argue this could make BI appear too close to the government. Permata Bank Chief Economist Josua Pardede suggested BI should limit its support to priority programs only to maintain credibility.

Maybank analysts added that BI’s government bond purchases should not exceed SRBI and repo issuances to protect its balance sheet. Banking analyst Arianto Muditomo further noted that burden sharing should only apply in emergencies like the Covid-19 pandemic, not under normal conditions.

Bright Institute economist Muhammad Andri Perdana stressed that under Law No. 4/2023, BI may only buy government bonds in the primary market during a crisis and with Financial System Stability Committee (KSSK) approval. He questioned whether this policy signals that the government and BI are tacitly acknowledging a crisis, even though officials insist financial stability remains solid.

Risks and Long-Term Implications

The burden sharing scheme was first introduced in 2020 during the pandemic, which caused BI’s holdings of government bonds to surge. As of September 3, 2025, BI still holds 24.3% of outstanding bonds, or Rp1,558.9 trillion, though down from its May peak of Rp1,754.67 trillion.

This remains the largest share compared to banks (20.66%), insurers and pension funds (18.52%), and foreign investors (14.75%). Prior to the pandemic, BI held less than 5%.

Such a large holding is raising concerns that BI’s flexibility in managing monetary policy could be constrained. With burden sharing inflating its operational burden, BI’s balance sheet risks slipping into deficit. Over the long run, excess liquidity and negative equity could weaken monetary policy transmission, reduce BI’s surplus, and limit its contributions to the state budget.

Under law, if BI’s capital-to-liability ratio falls below 3%, the government must inject additional capital. Conversely, if the ratio exceeds 10%, BI is required to remit surplus earnings to the state.