BI Rate Rises, Purbaya Reveals Strategy to Pursue 6% Economic Growth in 2026

Jakarta - The continued rise in Bank Indonesia’s benchmark interest rate this month to 5.75% has not made the government pessimistic about its ability to pursue economic growth of nearly 6% year-on-year in 2026. Finance Minister Purbaya Yudhi Sadewa stated that to ensure this rapid growth pace is achieved while BI aggressively raises the BI Rate, the government will maintain sufficient liquidity circulation in the economic system so the business sector can remain expansive. “We in the government are ensuring that money is in the economy, so businesses can continue to operate,” Purbaya said during a working meeting with Committee IV of the Regional Representative Council in Jakarta on Monday. In addition, Purbaya is utilising a public service agency under the Ministry of Finance’s management, the Government Investment Centre, to channel financing to micro and small enterprises with long tenors and low interest rates. “For instance, in Yogyakarta, there were small businesses affected by Covid that came to me asking for help. I have asked PIP to create a programme so they can pay in long-term instalments,” he said. “Directly from PIP, with low interest rates, it should be fine. I promised it has been disbursed, right? PT PNM and PIP, what is the interest rate? None, right?” he asserted. Bank Indonesia has been aggressively raising its benchmark interest rate to stabilise the rupiah exchange rate and manage inflationary pressures. Since 18 May 2026, the board of governors has increased the benchmark rate by 100 basis points from 4.75% to 5.75%. Historically, the aggressive monetary tightening cycle from Bank Indonesia in the 2022 to 2023 period had a significant dampening effect on credit distribution dynamics, particularly in the property sector. When the benchmark rate was held at 6% at the end of 2023, the growth rate of mortgage and home ownership credit was still able to record an expansion of 12.1% year-on-year, with a total value reaching Rp692.3 trillion. This performance supported overall property credit, which still grew positively by 7.6% year-on-year to Rp1,303.7 trillion in December 2023. However, the accumulated burden of high interest rates eventually began to erode the public’s real purchasing power in the subsequent period. By the end of 2024, the transmission of floating credit interest rate burdens began to pressure banking consumers’ financial resilience. Aggregate total property credit distribution growth decelerated to 6.5% year-on-year, with a value of Rp1,412.3 trillion in December 2024. This slowdown was in line with the declining trend in retail mortgage and home ownership credit growth, which fell to 10.0% year-on-year. During the same period, construction credit activity nearly stagnated, recording a growth rate of only 0.01% year-on-year, valued at Rp393.1 trillion.