Thu, 29 May 2003

SBI rate falls to 10.44%

The Jakarta Post, Jakarta

The interest rate on the one-month Bank Indonesia SBI promissory notes fell to 10.44 percent on Wednesday during the weekly bidding, compared to 10.68 percent in the previous week.

The central bank has been guiding its benchmark rate downward for over a year now amid low inflation and the rupiah's stronger exchange rate against the U.S. dollar.

The slide in the benchmark rate was the second since Burhanuddin Abdullah was elected as the new central bank Governor two weeks ago.

Burhanuddin has said that there was still room for the SBI rate to decline to around 10 percent. He said that the lower interest rate was crucial both to help ease the burden of the government in servicing its domestic debt, and to push more bank lending into the corporate sector.

Despite the declining trend of the benchmark rate, from over 17 percent early last year, lending from the banking sector to the real sector has remained weak.

Burhanuddin said that he would hold a meeting with bankers to seek ways on how to push banks, which have just started to recover from the financial crisis of the late 1990s, to lend more of their money to the business sector to help create economic growth.

Bank Indonesia also announced that the country's foreign exchange reserves in the third week of May increased by US$445.4 million to $34.47 billion.

The increase was mainly attributed to oil and gas revenue, Bank Indonesia said in a press statement.