Govt expects lower interest rates
Govt expects lower interest rates
JAKARTA (JP): The interest rate for three-month Bank Indonesia
promissory notes (SBI) should drop to below 23 percent in two
weeks' time from the current 29.82 percent, according to Bank
Indonesia deputy governor Miranda S. Goeltom.
"The interest rate on the 3-month SBI will soon decline," she
said on Thursday on the sidelines of a seminar on banking.
Miranda explained that the expectation of low inflation and a
stronger rupiah would allow a further decline in domestic
interest rates.
The rate will be used as the variable interest rate of the
government bonds, which are expected to be issued on Friday, to
finance the recapitalization of eight private banks and 12
provincial development banks.
In addition to the market interest rate, the bonds will also
carry a fixed interest rate.
Finance minister Bambang Subianto is scheduled to hold a news
conference on the bond issue on Friday.
Miranda said the continuing decline in the domestic interest
rate environment would bring the interest rate level of the
three-month SBI to near the level of the fixed rate of the bonds
by the end of this year.
Several government officials indicated earlier that the fixed
rate would range from 10 percent to 15 percent.
Miranda said that a further decline in the interest rate would
not hurt the rupiah due to several reasons.
She said the return on the local currency was still attractive
because of the low inflation level, combined with the influx of
foreign funds either through multilateral donors or private
sector investment.
"There are many factors that will allow a further decline in
the domestic interest rate without hurting the rupiah," she said.
"And the relationship between the interest rate and the rupiah
is no longer as strong as in the past when the crisis
heightened."
BI has allowed domestic interest rates to continue to decline
over the past two months without causing the rupiah to weaken.
The interest rate of the benchmark one-month SBI promissory
note is now 26.12 percent, compared to more than 36 percent two
months ago.
The government announced on Wednesday that it would inject Rp
24.5 trillion (US$3.06 billion) out of the Rp 27 trillion funds
needed to recapitalize eight banks.
The banks are publicly listed Bank Internasional Indonesia
(BII), Bank Lippo, Bank Universal, Bank Bali, and nonlisted Bank
Bukopin, Bank Prima Express, Bank Artha Media and Bank Patriot.
The government will also inject Rp 1.23 trillion to
recapitalize 12 provincial development banks from a total cost of
Rp 1.5 trillion.
The government will issue bonds to finance the
recapitalization program, which is designed to lift the capital
adequacy ratio (CAR) of the eight banks to the minimum 4 percent
level, and to 8 percent for the 12 development banks.
Bank Indonesia deputy governor Subarjo Joyosumarto said that
the government would finance 90 percent of the recapitalization
cost of Bank BII, Bank Lippo and Bank Universal.
He added the government also would provide more than 80
percent financing for the recapitalization of Bank Bali.
Initially, the government planned to provide 80 percent
financing with the remaining 20 percent was to be provided by the
banks' owners.
But the bank owners could not come up with the 20 percent cash
requirement in full because the recapitalization cost inflated
from the initial estimate of about Rp 14 trillion due to a
persisting negative interest rate spread problem. Only the
smaller nonlisted banks managed met the cash requirement. (rei)