The plan is the latest in the government’s moves to accelerate the roll-out of President Prabowo’s priority programmes
[JAKARTA] Indonesia plans to inject about 200 trillion rupiah (S$16 billion) into the economy to help boost growth, according to its newly-appointed finance minister.
The government will take some of the 400 trillion rupiah in cash reserves it has with Bank Indonesia and bring the funds back into the system, including by placing the money with state-owned banks to spur lending, Finance Minister Dr Purbaya Yudhi Sadewa told lawmakers in a hearing on Wednesday (Sep 10).
“My job here is to rev up the monetary and fiscal engines,” Dr Purbaya said, adding that he has asked the central bank not to absorb the fresh liquidity.
The rupiah held its gains after the announcement and closed 0.1 per cent stronger on Wednesday. The benchmark stock index was up 0.9 per cent to reverse three days of losses.
Dr Purbaya’s plan is the latest in the government’s moves to accelerate the roll-out of President Prabowo Subianto’s priority programmes.
The finance ministry earlier placed 16 trillion rupiah of its cash buffer this year to help state banks extend cheap lending for village cooperatives, while also earmarking some funds for low-cost housing. It also tapped the central bank, through a renewed burden-sharing arrangement, to help shoulder the debt costs of both programmes.
Dr Purbaya, who replaced Dr Sri Mulyani Indrawati on Monday, pledged to spur economic growth beyond 6 per cent in the “not-too-distant future” to hit the president’s 8 per cent target. He said the weakness in the economy is caused by a “drought” in the financial system, given slow government spending and sluggish money supply growth, despite recent interest rate cuts by the central bank.
To boost spending, Dr Purbaya said his ministry will monitor budget absorption more regularly, especially for programmes with large allocations such as the free school meals.
Bank Indonesia has cut policy rate by 125 basis points since September, while reducing the return and the issuance of its rupiah securities, known as SRBI, to loosen up more liquidity. BLOOMBERG
