(June 26): The Indonesian government will put an estimated 400 trillion rupiah (US$22 billion) of its standby funds in state-owned lenders to keep on fuelling economic growth, according to its finance chief.
The government currently keeps some 200 trillion rupiah in long-term placements in state banks, Finance Minister Purbaya Yudhi Sadewa said in a briefing in Jakarta on Friday. They had reduced it several weeks ago, but it tightened liquidity.
Under President Prabowo Subianto’s instructions, the ministry transferred the money back to state lenders to “keep the economy running” and potentially drive loan growth to as high as 15% this year, the finance chief said.
Purbaya said he plans to place another 100 trillion rupiah in shorter tenors, and another 100 trillion rupiah in flexible terms, without specifying a timeline.
The pronouncement comes just two weeks after Bank Indonesia had announced it is aiming to push up bond yields to lure foreign flows back and bolster the ailing rupiah. It also raised its policy rate by a combined 50 basis points this month.
“Many people say my decision for placing the funds in state banks is a wrong step,” said Purbaya. “Turns out that’s the only engine for the economy at the moment.”
See also: MAS June survey shows expectations of growth moderation and higher inflation
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