Why Indonesia's QE Is Terrifying
The central bank is loading up on bond purchases. But what works in developed markets doesn’t necessarily apply here.
Come on in. The water’s fine.
Photographer: Getty Images via Bloomberg
Now that the world’s largest central banks are buying trillions of dollars of bonds, emerging markets reckon they can experiment, too. From Colombia to South Africa, developing nations are launching their own quantitative easing programs to stem the fallout from the coronavirus outbreak. But can these economies, known for capital flight and vulnerable currencies, pull it off?
Indonesia, with its current-account and fiscal deficits, has turned out to be a surprising forerunner in Asia. In late March, the government tapped the central bank to buy sovereign bonds directly in the primary market, a practice shunned for two decades. This would help fund a fiscal deficit that’s expanded to 5.1% from its long-established cap of 3%.