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View all search resultsFinance Minister Purbaya Yudhi Sadewa has once again injected liquidity into Indonesia’s banking system, placing an additional Rp 70 trillion (US$4.3 billion) in state budget surplus funds with state-owned banks. The measure is intended to spur lending to the real sector and, ultimately, accelerate economic growth. Yet its effectiveness remains uncertain, raising a fundamental question: Can another liquidity injection genuinely revive credit growth, or is Purbaya mistaking the symptom for the cause in a classic chicken-and-egg problem?
Experts noted that the risk of banks getting too reliant on the funds “is real” and a dependency cycle might materialize as banks grow accustomed to the idea that the funds are a “permanent source of liquidity”.
The finance minister has rejected state-owned banks' call to extend the liquidity injection scheme, citing a need for flexibility while noting that the central bank would step in if necessary to maintain a stable money supply.
The OJK as well as industry observers have welcomed the Finance Minister's move to extend the liquidity injection policy for another six months in a bid to generate higher loan growth, while suggesting that a subsequent extension could be on the books when the current period ends in March.
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