SBI falls sharply to 15.81%

SBI falls sharply to 15.81%

JAKARTA: The weighted average interest rate on one-month SBI promissory notes fell sharply to 15.81 percent at the weekly's auction Wednesday, from 16.08 percent at last week's auction.

The central bank said in a statement that the decrease in the interest rate was in line with plans to lower rates to reduce the cost payable by the government in funding its budget deficit.

Bank Indonesia accepted Rp 24 trillion (US$2.6 billion) in bids at the auction, or 76.8 percent of total bids.

The central bank has been guiding rates lower since the start of the year.

Lower interest rates cut the government's cost of funding its budget deficit, which is set to total 2.5 percent of gross domestic product this year.

The government must pay interest on billions of dollars of bonds that were issued since the 1997 Asian crisis to recapitalize the banking sector. The interest rates on many of the bonds are linked to the SBI notes. --JP