Bank Indonesia Reveals Strategy to Maintain Stability while Boosting Growth
The Acting Governor of Bank Indonesia (BI), Destry Damayanti, has emphasised that the central bank is not only focused on maintaining the stability of the rupiah exchange rate and inflation but is also paying close attention to economic growth. Support for growth is being delivered through a policy mix involving macroprudability, payment systems, and the strengthening of financing to the real sector.
Destry stated that amidst high global uncertainty caused by the hawkish stance of the US Federal Reserve and the potential ‘higher for longer’ interest rate era, BI continues to prioritise stability. However, these policies are being implemented alongside efforts to maintain economic growth momentum. “Is Bank Indonesia not concerned with growth? No. We remain concerned with growth, but we are using macroprudential and payment system policies to drive economic growth,” Destry said during an online Editors Briefing in Parapat, North Sumatra, on Friday.
According to Destry, BI is maintaining the BI Rate at 5.75 per cent to safeguard the rupiah’s exchange rate and anticipate inflationary pressures amidst global uncertainty. Concurrently, the central bank is optimising other instruments to ensure the real sector continues to receive financing support. One such measure involves providing liquidity incentives through a reduction in the statutory reserve requirement (GWM) for banks that extend credit to priority sectors, including micro, small, and medium enterprises (MSMEs).
Furthermore, BI is preparing macroprudential liquidity policies to strengthen the banking sector’s intermediation function. These policies are directed at ensuring banks channel more credit to the real sector rather than placing funds in securities. “What we expect is for banks to return to their original function as an intermediary institution between the financial sector and the real sector, which is to distribute credit,” said Destly.
Destry added that following the resignation of BI Governor Perry Warjiyo, the central bank’s policy direction remains unchanged. BI will continue to prioritise the stability of the rupiah and inflation while optimising macroprudential instruments, payment systems, MSME development, Sharia economics, and the green economy to support growth.
Destry also noted that BI will continue to strengthen synergy with the Ministry of Finance, the Financial Services Authority (OJK), the Indonesia Deposit Insurance Corporation (LPS), and the Financial System Stability Committee (KSSK) to maintain financial system stability and support credit distribution. In the field of inflation control, BI and the government are strengthening the Strategic Food Inflation Control Movement (GPIPS), a transformation of the National Food Inflation Control Movement (GNPIP). This programme focuses on increasing productivity, strengthening food distribution, and developing partnerships to maintain price stability and support national food security.