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Sluggish external trade brings forex loans down
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Rupiah and US dollar notes are arranged side by side in a bank. (Antara/Rosa Panggabean)
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s international trade remains sluggish, demand for foreign-exchange denominated loans is declining, with 2 percent growth year-on-year (yoy) as of July compared to 9 percent for rupiah-denominated loans.
Foreign-exchange denominated loans are mostly given as short term trade loans for export-import transactions, thus the loan demand depends on trade volume. Exports and imports were down 10.61 and 9.42 percent yoy on a year-to-date cumulative basis between January and August.
"Corporations are reducing their application for foreign-nominated loans and even terminating their existing loans," Bank Indonesia (BI) deputy governor Erwin Rijanto said in a press conference at BI on Friday.
The central bank expects international trade recovery to take longer as main trading partners, the US, Europe, Japan, and China have not shown significant growth. Banks will have to boost domestic credit.
"Demand for the rupiah is still strong, and we already eased the loans to value [LTV] rule, hopefully it can boost domestic credit," Erwin told The Jakarta Post.
BI targets 11 percent credit growth next year, along with LTV easing. The central bank recently cut its reference rate, the seven-day repo rate, by 25 basis points (bps) from 5.25 to 5 percent. (evi)
