T

he government expressed concerns over liquidity during its first-ever attendance at Bank Indonesia'€™s (BI) monthly meeting on Wednesday.

Coordinating Economic Minister Darmin Nasution said he had given input to the central bank on behalf of the government regarding the current economic situation.

'€œWe talked about a lot of things. On my part, of course I talked about what the government was doing to do to boost growth,'€ he said after attending the meeting for two-and-a-half hours.

'€œWe talked about the [state] budget, investment and how they would affect liquidity. Major investment and early disbursement of state funds will surely require more liquidity.'€

Darmin was quick, however, to say he had not proposed an interest rate cut, despite many believing that a cut would provide greater liquidity within the financial system to support economic growth. The government expects the economy to rise by 5.3 percent this year after slow growth of around 4.7 percent in 2015.

'€œLet BI do its own calculations. I didn'€™t suggest anything to do with monetary policy, whether it should be kept tight or loose,'€ said Darmin, who held the BI top job from 2010 to 2013 before being succeeded by current Governor Agus Martowardojo.

Darmin was accompanied by Office of the Coordinating Economic Minister secretary Lukita Dinarsyah Tuwo. It was the first time that BI had invited government representatives to its monthly deliberations, despite being allowed to do so by the BI Law.

Darmin and Lukita attended only the first day of the meeting; the second day will proceed with BI'€™s six-man board of governors taking a decision on its key interest rate policy, without the attendance of any government officials.

Many expect the central bank to begin cutting its benchmark rate this month, as a lower rate will help open up liquidity and provide more affordable financing for businesses.

The rate currently sits at 7.5 percent, unchanged since February. Various statistics suggest that BI'€™s hawkish stance'€”which began in June 2013 after Agus took office'€”has gradually dried up liquidity in the market.

A report on liquidity by the Deposit Insurance Corporation (LPS) also shows that liquidity in the interbank market appeared tighter than usual in late December.

The overnight rupiah Jakarta Interbank Offered Rate (JIBOR) climbed 75 basis points (bps) from Dec. 23 to 30, while the one-month rupiah JIBOR rose 25 bps.

LPS economist Doddy Ariefianto said that Darmin'€™s remarks were the government'€™s subtle way of asking BI to slash the rate.

'€œThere'€™s no such thing as overflowing liquidity with high interest rates. If Pak Darmin said we needed liquidity, he was politely asking BI to lower the rate,'€ he said in a phone interview.

He added that BI'€™s credibility would be at stake if it did not make use of the current window of opportunity, especially because the central bank had previously cut its reserve requirement ratio (GWM) in November.