Indonesia to inject $15b into economy to spur growth

JAKARTA – Indonesia plans to inject about 200 trillion rupiah (S$15 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 the central bank and return it to the system, including by placing the funds with state-owned banks for lending, Finance Minister Purbaya Yudhi Sadewa told lawmakers in a hearing on Sept 10.

“My job here is to rev up the monetary and fiscal engines,” Mr Purbaya said, adding that his first step would be to inject money into the financial system.

The government will also accelerate its spending, he said, adding that his ministry will monitor budget absorption more regularly, especially those programmes with large allocations such as the free school meals.

Mr Purbaya, who was

appointed finance minister

on Sept 8, told a parliamentary hearing that because of slow government spending, the state’s cash balance at Bank Indonesia had risen to 430 trillion rupiah.

After the hearing, he told reporters that policy mistakes have been made.

“I have seen that our financial system is dry. That’s why the economy is slowing and, for the past year, it is hard for people to find jobs. It’s because there were mistakes in the monetary and fiscal policies,” he said.

Bank Indonesia began an easing cycle in September 2024 that has so far seen interest rates cut by 125 basis points.

It has also loosened liquidity by cutting back its sales of short-term notes, which were in part intended to attract capital to support the rupiah currency.

On Sept 10, BI spokesman Ramdan Denny Prakoso told reporters the central bank was also adding liquidity by purchasing government bonds in the secondary market, as well as its new “burden sharing” agreement with the government where it will raise the interest rate it pays on government deposits. BLOOMBERG, REUTERS