BI moves to ease liquidity
BI moves to ease liquidity
JAKARTA (JP): Bank Indonesia, the central bank, moved
yesterday to cut the foreign exchange reserves requirement for
commercial banks from 5 percent to 3 percent to add to the dollar
supply in the market.
The central bank also decided to reopen its money-market
securities (SBPU) facility to inject more cash into the country's
hard-pressed economy, while reducing the cost of borrowing by
cutting its Bank Indonesia Certificate (SBI) rates by one
percentage point.
Speaking at a press conference, Bank Indonesia managing
director Paul Soetopo Tjokronegoro noted that the rupiah
continued to weaken against the U.S. dollar because the dollar
supply in the domestic market was much less than demand.
"Since one of the reasons for the persistent weakening of the
rupiah is the limited dollar supply, we decided today to increase
the dollar supply in the market by reducing the minimum
requirement for foreign exchange to 3 percent from 5 percent,"
Paul said.
He said the 2 percent difference in commercial banks' foreign
exchange reserves deposited in Bank Indonesia accounted for some
US$850 million.
"Hopefully, this balance could be supplied to the market that
would eventually lessen pressure on the rupiah," he said.
Nevertheless, rupiah reserve requirements for commercial banks
should remain the same, at 5 percent of their third party funds
denominated in rupiah.
And commercial banks' foreign exchange net open position
should also remain at 25 percent of their working capital, Paul
said.
Paul added that the central bank would also introduce a pre-
shipment rediscount facility for special exporters so that they
could sell their future export earnings to get rupiah liquidity.
"We hope the new export promotion facility in the form of a
pre-shipment export financing facility will give more room for
economic activities and add to the future dollar supply," Paul
said.
Besides pre-shipment financing support, Bank Indonesia also
has been providing a post-shipment financing facility in the form
of a rediscount and swap facility so exporters can sell their
dollar earnings in the spot market and buy them back in the
future at an agreed rate.
Paul added that the central bank decided to reopen its money
market certificate (SBPU) facility, which had been closed since
July 24, to inject new liquidity to cash-strapped businesses.
SBPUs are short-term money-market securities used by the
central bank to inject liquidity into the market.
But Paul said the reopening of SBPU facilities would be done
in phases and controlled so that it would not undermine the
rupiah rate.
Paul said the central bank had extended subsidized credit to
several state banks and disbursed special SBIs early of their
maturity to finance low-cost housing projects.
State-owned Bank Tabungan Negara, for instance, disbursed low-
cost housing credit worth Rp 332 billion during the last two
months, he added.
Earlier yesterday, the central bank surprised the market with
a bold move by cutting its one-day to three-month SBI rates by
one percentage point amid weakening regional currencies.
SBIs are short-term rupiah-denominated obligations issued by
the central bank to drain excess liquidity from the market.
Following the rate cut, the one-day SBI is now 14 percent, the
two to six-day SBI is 15 percent, one-week SBI 16 percent, two-
week 18 percent, one-month 20 percent, two-month 19 percent and
three-month 18 percent.
The cut was the fifth reduction in SBI rates since the central
bank hiked the rates almost three-fold in August in a bid to
check the fall of the rupiah. (rid)
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