Indonesia’s new finance minister wants to immediately flood the economy with roughly US$12 billion in cash to jump-start lending, proving his commitment to President Prabowo Subianto’s growth agenda barely three days into the job.
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The government would transfer half of the 400 trillion rupiah in cash reserves that it held with the central bank to state-owned lenders, Finance Minister Purbaya Yudhi Sadewa told lawmakers in a hearing on Wednesday. He added on Thursday that the cash injection would be done “soon” and deployed all at once to banks.
A cash injection of this scale from the finance ministry is unprecedented, underlining Purbaya’s quest for a quick fix to what he said was a “drought” in the financial system that has choked activity in Southeast Asia’s largest economy.
The reserve pile had accumulated due to past underspending, and some should be tapped to support the economy, the new finance chief said on Wednesday.
“My job here is to rev up the monetary and fiscal engines,” he said, adding that he had asked the central bank not to absorb the fresh liquidity.
“From a liquidity perspective, the move to deploy idle funds bodes well for money velocity,” Radhika Rao, senior economist at DBS Bank Ltd., wrote in a research note.