PUBLIC POLICY INOVATION:INDONESIAN ECONOMIC RECOVERYCENTRAL BANK DIGITAL TRANSFORMATIONPerry Warjiyo
Governor of Bank Indonesia

GraSPP Research Seminar
8 December 2022

THE GLOBAL ECONOMY: SLOWER GROWTH, HIGH INFLATION,INCREASING UNCERTAINTYPROLONGEDRUSSIA – UKRAINE CONFLICTUS – CHINA
TRADE WARLOCK DOWN IN CHINACONTINUESSLOWER GLOBAL GROWTH

SUPPLY-CHAIN DISRUPTIONINVESTOR’S NEGATIVE RISKPERCEPTIONFED FUND RATE - HIGHER FOR LONGERHIGH GLOBAL INFLATIONSTRONG US DOLLAR2CASH IS THE KINGOTHER CURRENCIESUS DOLLAR

GraSPP Research Seminar – 8 December 2022 – 01

BANK INDONESIAPOLICY COORDINATION & INNOVATION FOR ECONOMIC RECOVERYThe synergy and innovation of the national economic policy mix continues to be strengthened as the key
to strengthening the resilience and the recovery of the national economy…

NATIONAL POLICY MIX:SINERGY FOR STABILITY AND ECONOMIC RECOVERY

5 (FIVE) POLICY RESPONSES:OBJECTIVES:

1 FISCAL-MONETARY COORDINATION

2ACCELERATION OF FINANCIAL
SECTOR TRANSFORMATION

3ACCELERATION OF REAL SECTOR
TRANSFORMATION4ECONOMY AND FINANCIAL SYSTEMDIGITALIZATION

51 STABILITY: SAFEGUARDINGSTABILITY FROM GLOBALSHOCKS2 RECOVERY: GROWTHMOMENTUM FROMDOMESTIC DEMAND

3 RISE: SUSTAINABLE

MEDIUM-TERM HIGHECONOMIC GROWTHGREEN & INCLUSIVE ECONOMYGraSPP Research Seminar – 8 December 2022 – 01

BANK INDONESIA

3INDONESIAN ECONOMY: ECONOMIC RECOVERY CONTINUES WITH SOLIDFUNDAMENTALS AND ACCELERATED DIGITALIZATIONDOMESTIC ECONOMY PROSPECT REMAININTACTINFLATION WILL RETURN TO THE TARGETRANGECURRENT ACCOUNT DEFICIT IS EXPECTEDTO REMAIN MANAGEABLEBANK INTERMEDIATION CONTINUE TO
IMPROVE

DIGITAL ECONOMY AND FINANCE WILL CONTINUE TO EXPAND

E-COMMERCE

ELECTRONIC-MONEYGraSPP Research Seminar – 8 December 2022 – 01

DIGITAL BANKINGBANK INDONESIA4BANK INDONESIA POLICY MIX: MAINTAINING STABILITY,SUPPORTING ECONOMIC RECOVERY
PRO-STABILITYMONETARY

PRO-GROWTHMACROPRUDENTIAL• Well-calibrated interest rateincrease to drive core inflation
within the 3±1% target insemester I-2023

PREPARATION FORRELOCATION TO THE NEW
CAPITAL

CLOSE COORDINATION WITHTHE GOVERNMENT AND THENEW CAPITAL AUTHORITY

5• Rupiah exch. rate stabilization
through spot and DNDF
intervention and SBN (govtbonds) transactions in thesecondary market.
• Infation management throughCentral and Regional Inflation
Control Teams (TPIP and TPID)
and National Movement for
Food Inflation Control (GNPIP)PAYMENTSYSTEM

FINANCIAL MARKETDEEPENING

GREEN & INCLUSIVEECONOMY & FINANCE• 0% down payment remain
in force and increase thereserve requirement
incentives for banks inlending.

• Payment system digitalization acceleration: 45 million
QRIS users, BI-FAST extensification, SNAP, paymentinfrastructure integration, regulation reformation.

• Financial system stability
committee coordination
to increase financing forpriority sectors, green andSMEs.

• Coordination with the government in electronification ofsocial support distribution, local govt transaction andtransportation.

• Coordination with thegovernment for small
credit and national
movement for local goods
and tourism

GraSPP Research Seminar – 8 December 2022 – 01

• ASEAN-5 cooperation in payment system connectivity(QR, Fast payments, local currency transactions)• Digital Rupiah development through “Garuda Project”(conceptual design, infrastructure integration &technology)

BANK INDONESIACENTRAL BANK DIGITAL CURRENCY: 3 KEY ISSUES, LESSONS LEARNEDAND WAY FORWARD

1

CBDC DESIGN: The optimal design options of CBDC convergent towards digitalization of sovereignty
public good to serve public interest as well as preserving central bank mandates and objectives

2

CBDC & FINANCIAL INCLUSION: Acceleration of payments system digitalization for promoting
effective financial inclusion and as prelude to CBDC issuance

3

CBDC & CROSS BORDER PAYMENTS: Enhancing cross-border payments with CBDC requirescollaborative governance policies to minimize macro-financial risks e.g. regulation of forex, capitalflows, operational risk, market supervision towards spillover
GraSPP Research Seminar – 8 December 2022 – 01

BANK INDONESIA67I S S U E S # 1 : C B D C ’ S A R C H I T E C T U R E , T E C H N O L O G Y, D I V E R S E D E S I G N A S P E C T S

DIGITAL RUPIAH: INTEGRATED WHOLESALE AND RETAIL CBDC
*KDR = Khasanah Digital Rupiah (or Digital Asset Depository)**W-CBDC platform comprises of cash ledger (CBDC) andsecurities ledgers (tokenised securities) which will supportdelivery-versus-payment settlements

END USERSBANK AND NBFI

❑ Two Tier CBDC
Distribution and Collection R-CBDC via:1) wholesaler – end user
2) wholesaler – retailer – end user (via BI-FAST)❑ One Tier CBDC
W-CBDC issuance to wholesale members

CBDC issuance directly to end-user (futuredevelopment)
Validation and settlement of W-CBDC dan RCBDC transactions are carried out in the platformby accessing via web, application, andwallet(offline/online functionality)•The Digital Rupiah design could promote financial inclusionand end-to-end innovation & efficiency•In the event that private companies are unable to provide
services in underdeveloped areas, Bank Indonesia could
distribute CBDC directly to end-users.

GraSPP Research Seminar – 8 December 2022 – 01

BANK INDONESIA

8ISSUES #2: CBDC’S PROSPECTIVE ROLE IN FINANCIAL INCLUSION

DIGITAL RUPIAH AND FINANCIAL INCLUSION• Wholesale CBDC as starting point in Digital Rupiah might take longer in speeding up Financial Inclusion, but more benefit formonetary and financial stability.
• Indonesia has already started the Financial Inclusion initiative breakthrough under the Indonesian PS Blueprint 2025.

• Changing demands on retailpayments with a shift
towards digital payments• A growing number ofpotential innovations
involving private digitalcurrencies, which aretriggering shadow banking,shadow currency & shadow
central banking• Accelerate digital financeand economic integration inorder to secure national
interests in each jurisdiction.
GraSPP Research Seminar – 8 December 2022 – 01

BANK INDONESIA

9I S S U E S # 3 : C B D C ’ S P R O S P E C T I V E R O L E I N C R O S S - BO R D ER PAY M E N T S

GOVERNANCE ARRANGEMENT IN CROSS-BORDER PAYMENTS• While CBDCs have the potential to address key challenges in cross-border payments, the need to collaborate both bilaterally andmultilaterally on governance arrangements such as currency arrangement is also an important factor in cross-border payments.
• ASEAN-5 Payment Connectivity experience shows that governance arrangements are as important as technical arrangements forcross-border payments
Governance Arrangements in CBDCGraSPP Research Seminar – 8 December 2022 – 01

ASEAN-5 Payment Connectivity

BANK INDONESIA

PUBLIC POLICY INOVATION:
INDONESIAN ECONOMIC RECOVERYCENTRAL BANK DIGITAL TRANSFORMATION
Perry Warjiyo
Governor of Bank Indonesia

GraSPP Research Seminar
8 December 2022