BI's benchmark rate forecast to near 17 percent this week
BI's benchmark rate forecast to near 17 percent this week
JAKARTA (JP): Bank Indonesia deputy governor Miranda S.
Goeltom said on Monday that the benchmark interest rate of Bank
Indonesia's 1-month promissory note (SBI) was expected to fall by
between 1 percent and 1.5 percent at Wednesday's weekly auction,
to around the 17 percent level.
She also projected that the interest rate of the central
bank's 3-month promissory note would drop to below 15 percent by
the end of this year, from the current level of 23.33 percent
"The interest rate of the 1-month SBI should fall by 100 to
150 basis points this week," she told reporters on the sidelines
of a hearing session with the House of Representatives commission
VIII on the state budget and banking.
A basis point is one-hundredth of a percentage point.
Bank Indonesia has been allowing domestic interest rates to
fall significantly over the past couple of months on the back of
expectations of a stronger rupiah and lower inflation.
The benchmark one-month interest rate is currently 18.84
percent, compared to more than 35 percent early this year, and
more than 70 percent last August.
The interest rate of the 3-month SBI has also fallen to 23.3
percent from nearly 30 percent in May.
Miranda projected that the interest rates of both the 1-month
SBI and 3-month SBI would decline to below 15 percent by the end
of this year.
She said that as the interest rate margin between the two
types of papers decreases, the interest burden of the government
bank recapitalization program could be kept at the targeted
amount.
The government has issued some Rp 103.8 trillion in bonds,
mostly used to recapitalize 11 private banks, with a small
fraction used for recapitalizing provincial development banks.
Over Rp 95 trillion of the bonds issue carries coupon rates
linked to the interest rate of the 3-month SBI. The remaining Rp
8.6 trillion worth of bonds carries fixed interest rates of 12
percent and 14 percent.
The government has allocated some Rp 34 trillion in the
1999/2000 state budget for the payment of the coupon rate. Some
Rp 17 trillion is expected to come from the sale of various
assets controlled by the Indonesian Bank Restructuring Agency.
Miranda said the government has injected the recapitalized
banks with Rp 600 billion in coupon payments.
She said the payments were made on June 15 and June 25, adding
that another payment would be due on July 25.
The real sector has urged the recapitalized banks to
immediately resume lending, particularly as domestic interest
rates have dropped significantly.
But Miranda said banks may not be able to immediately start
lending, as they need more time to adjust to the lower interest
rate environment.
She said banks have yet to resolve their problem loans.
"Banks may also think that there's still a considerable risk
in lending to the real sector," she said.
However, she added that some banks had started to provide
loans, although in limited amounts.
Miranda also denied the suggestion that a lower interest rate
level would weaken the exchange rate of the rupiah against the
U.S. dollar.
The rupiah had generally weakened last week, but the currency
gained strength on Monday, closing at Rp 6,710 per dollar
compared to Friday's close of Rp 6,765.
Traders said that comments from Bank Indonesia Governor
Sjahril Sabirin earlier in the morning that a level of between Rp
6,000 and Rp 6,500 to the dollar remained a "good rate" had
helped strengthen the currency.
"We see the rupiah equilibrium between Rp 6,000 and Rp 6,500,"
he told members of the House of Representatives commission VIII
on state budget and banking.(rei)