SBI interest rate jumps to 12.33%
SBI interest rate jumps to 12.33%
JAKARTA (JP): The benchmark interest rate on the one-month
Bank Indonesia SBI promissory notes increased to 12.33 percent on
Wednesday, the highest level since the end of last year.
Bank Indonesia said in a statement that its Wednesday weekly
auction of one-month SBI notes resulted in a weighted average
interest rate of 12.33 percent compared to 11.74 percent last
week.
The central bank has allowed the benchmark interest rate to
increase for eight consecutive weeks.
Bank Indonesia has said that the rate increase is particularly
meant to defend the beleaguered rupiah.
The rupiah ended relatively flat at Rp 8,685 per U.S. dollar
in late trading on Wednesday compared to Rp 8,688 on Tuesday.
Analysts have said that the interest rate increase had so far
failed to strengthen the exchange rate of the rupiah particularly
due to ongoing social and political problems at home.
Finance Minister Bambang Sudibyo commented on Wednesday that
the rupiah did not react to interest rate alone, but also to
other factors including social and political development.
"The rupiah has been fluctuating particularly due to non-
economic factors," he told reporters prior to a cabinet meeting.
The rupiah has been under pressure over the past couple of
months. The government target for the rupiah this year is at Rp
7,000 per dollar.
Bank Indonesia deputy director Miranda Goeltom said recently
that the one-month SBI interest rate should be less than 12
percent by the end of this year if domestic social and political
uncertainty subsided.
She indicated that the SBI rate would continue to increase in
the run up to the August special session of the People's
Consultative Assembly.
Bank Indonesia deputy governor Subarjo Joyosumarto said that
the interest rate increase would not do much harm to the
government bank restructuring program as it didn't reach the 15
percent level.
But some analysts have said that the interest rate increase
would at least inflate government spending to finance the
country's bank recapitalization program.
The government bases the yields of its bonds to finance the
recapitalization program on SBI rates.
International Monetary Fund Jakarta representative John
Dodsworth said on Tuesday that so far there had been "no harm
done" by the interest rate increases.
But he warned that the interest rate could continue to move
toward a risky level if current market sentiment was not changed.
He said that it's crucial for the government to accelerate the
disposal of assets under the Indonesian Bank Restructuring Agency
(IBRA) and to restructure the corporate overseas loans to revive
market sentiment. (rei)