A screenshot - Deputy Minister of Finance Suahasil Nazara during the G20 Side Event "International Best Practices and Lesson Learned on LIBOR" which was monitored in Jakarta, Monday. (13 June, 2022). (ANTARA/Sanya Dinda/ak).
Of course, the financial sector must understand this transition and must prepare to maintain stabilityDeputy Finance Minister Suahasil Nazara ensures national economic and financial stability will be maintained amid the transition to discontinue the use of London Inter Bank Offered Rate (LIBOR) as the base interest rate, or benchmark.
“When it comes to basic interest rates, of course, our first perspective is related to economic stability, the stability of our financial sector. It is very important to have a stable financial sector in the midst of economic recovery," Nazara stated at the G20 Side Event "International Best Practices and Lesson Learned on LIBOR" on Monday.
The government will ensure that domestic financial sector players are ready for the phasing out of LIBOR, he affirmed.
As a result, the stability of this sector will be maintained, he stressed.
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"Of course, the financial sector must understand this transition and must prepare to maintain stability," the deputy minister of finance stated.
One of the government's concerns is the impact of eliminating LIBOR as a benchmark or reference for interest rates for Indonesian securities and debt securities.
"Of course, it will have an impact, and we have to make sure that the impact can be controlled. The impact will not last long, it will be as efficient as possible, and it will not create unnecessary financial instability for the economy," he remarked.
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Bank Indonesia, the Financial Services Authority, the Ministry of Finance, and the Indonesia Foreign Exchange Market Committee (IFEMC) formed a working group, or the National Working Group on Benchmark Reform (NWGBR), to prepare for the transition of LIBOR that was being abolished as the base interest rate, starting January 1, 2022.
The NWGBR has also released the LIBOR Transition Guide for Indonesian market players in December 20021 to provide information regarding the background to the LIBOR discontinuity, the timeline for discontinuing LIBOR publication, implications of the LIBOR transition, as well as preparation guidelines and recommendations for the LIBOR transition that can be used as a reference for market participants.
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