


Indonesia's new finance minister plans liquidity measures with central bank to boost growth


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Indonesia’s New Finance Minister to Tighten the Leverage on Growth with Central‑Bank Collaboration
When Prabowo Subianto was sworn in as Indonesia’s Finance Minister on 28‑July 2023, the country’s economic engine already felt the tremors of a post‑COVID rebound, high global commodity prices, and a persistent battle against inflation. In a high‑profile press briefing that followed his appointment, Prabowo set a clear agenda: a coordinated liquidity programme with Bank Indonesia (BI) aimed at unlocking credit, stabilising banks, and steering the economy towards robust, inflation‑anchored growth. The article in The Print chronicles that policy brief, weaving together Prabowo’s own words, background on Indonesia’s macro‑economic landscape, and the institutional mechanics that will deliver the plan.
1. A New Minister with a Military‑Minded Discipline
Prabowo, a former commander of the Indonesian National Armed Forces, brings a reputation for order and decisive action. His background has earned him both admiration and criticism; some observers fear that a hard‑line approach could tilt fiscal policy towards austerity, while others applaud his willingness to confront systemic corruption and inefficiency.
In his opening remarks, Prabowo acknowledged that Indonesia still faces a “tight balance” between promoting growth and curbing inflation. “The economy is resilient, but we must prevent overheating and protect the vulnerable,” he said. He stressed that his team would adopt a “multi‑pronged” strategy that blends fiscal prudence, monetary support, and targeted reforms.
2. The Liquidity Blueprint – A Two‑Fold Approach
The core of Prabowo’s announcement revolves around liquidity. He explained that the government would work hand‑in‑hand with BI’s Monetary Policy Committee (MPC) to ensure banks have enough capital to lend, especially to small‑and‑medium enterprises (SMEs), which are the backbone of Indonesian commerce.
(a) Lowering the Policy Rate and Credit Cost
Prabowo noted that BI’s policy rate – the repo rate – sits at 5.50 %. The MPC would monitor inflation dynamics and decide on incremental cuts if conditions permit. “A modest easing, coupled with credit‑support programmes, will help keep bank deposits at healthy levels while lowering the cost of borrowing for firms,” he added. This is a reference to BI’s regular quarterly MPC meetings, which set the policy rate and are documented on the bank’s website.
(b) Expanding the Monetary Base
The minister announced a “liquidity injection” scheme that will involve the central bank purchasing corporate bonds and other assets from the market. This operation, sometimes called “Quantitative Easing” (though in Indonesia it is rarely labeled as such), will expand the monetary base, giving banks a richer pool of reserves. Prabowo highlighted that BI’s “open‑market operations” will be a key instrument in this effort, an approach that has become standard for many emerging markets.
3. Fiscal Discipline Meets Monetary Flexibility
The article underscores that Prabowo is not simply opening the money supply without bounds. He emphasized that fiscal policy would stay “anchored” and that the Ministry of Finance would maintain its 2024 target of a 1.8 % debt‑to‑GDP ratio. The new finance ministry is already drafting a “Fiscal Sustainability Framework” that links borrowing to productivity‑enhancing projects rather than consumer‑facing subsidies.
In an interview on The Print, Prabowo said that the ministry would coordinate with BI to avoid “dual track” fiscal‑monetary policy, which can distort the market. He referenced the “Fiscal and Monetary Coordination Board” – a body that was recently re‑established in Jakarta – and promised to use it to align policy signals.
4. Supporting the SME Corridor
A recurrent theme in the briefing is the plight of SMEs, which have struggled during the pandemic and are now facing high interest rates. Prabowo announced a “SME Credit Programme” that will provide low‑rate lines of credit to banks, conditional on banks extending loans to SMEs. The Ministry also plans to simplify regulatory requirements for SME borrowers, drawing on lessons from the “SME Financing Reform” that saw a 15 % drop in loan processing times last year.
The Print article links to the Ministry’s own policy brief on SME reforms, offering more granular details on eligibility criteria, risk‑sharing mechanisms, and the expected 10 % increase in SME lending over the next 18 months.
5. The Macro‑Policy Landscape – Growth, Inflation, and External Shocks
Prabowo’s liquidity plan is set against a backdrop of robust growth forecasts. The Indonesia Bureau of Statistics (BPS) projects 5.6 % GDP growth for 2024, while the Bank Indonesia inflation target sits at 3.50 % ±1 %. The new finance minister highlighted that his strategy will aim for a “growth‑inflation sweet spot” – growth that does not spur overheating.
He also warned that external shocks – such as rising global interest rates, supply chain disruptions, and commodity price volatility – could undermine the plan. In a reference to the World Bank’s latest “Doing Business” report, Prabowo pledged that Indonesia will continue to ease regulatory barriers, particularly for foreign investment.
6. Institutional Signposts – What to Watch
The Print article points readers to several key sources for deeper insight:
- Bank Indonesia’s Official Website – for policy‑rate decisions, MPC meeting minutes, and open‑market operation details.
- Indonesia Ministry of Finance – for the fiscal sustainability framework and SME lending guidelines.
- BPS Reports – for quarterly GDP and inflation data.
By weaving these sources together, the article constructs a coherent narrative of Indonesia’s new economic direction, anchored by the synergy between the Ministry of Finance and the central bank.
7. Bottom Line – A Balanced Act
Prabowo Subianto’s liquidity measures aim to strike a balance between two competing imperatives: stimulating growth and containing inflation. The ministry’s coordinated approach with BI is designed to provide banks with enough capital to lend while avoiding a runaway monetary expansion that could trigger price pressures. At the same time, the fiscal discipline framework ensures that the country’s debt trajectory remains sustainable.
In sum, the article in The Print captures a pivotal moment in Indonesia’s economic policy. The minister’s strategy is clear: use the tools of monetary policy – lower policy rates, liquidity injections, and SME credit programmes – while keeping fiscal policy tight and aligned. The real test will come in the coming months as BI’s MPC meets and the global economy continues to evolve. For now, the stage is set for a measured, data‑driven push towards a resilient and inclusive growth path.
Read the Full ThePrint Article at:
[ https://theprint.in/world/indonesias-new-finance-minister-plans-liquidity-measures-with-central-bank-to-boost-growth/2739434/ ]