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<\/p>\nisappointing data on bank lending raises questions about the effectiveness of the Finance Ministry\u2019s Rp 200 trillion (US$12 billion) liquidity injection conducted in early September to jump-start economic activity, with economists pointing to a lack of credit demand.<\/p>\n
Finance Minister Purbaya Yudhi Sadewa said in a state budget press conference on Thursday that \u201cthe full impact of the increased liquidity will take about two to three months [to materialize], from the moment the money is injected\u201d, a reversal from the one-month time horizon suggested in late September.<\/p>\n
One of the first things Purbaya did since taking up the minister\u2019s mantle in early September was to move Rp 200 trillion of government cash deposited at Bank Indonesia (BI) to government accounts in five commercial banks, with the deposit rate set at 80 percent of the BI Rate, in hopes of spurring credit growth.<\/p>\n
The banks, all state-owned enterprises (SOEs), could only receive the funds under the condition that the injection is to be used exclusively for disbursing loans. Purbaya explained that the banks would be forced to find ways to make up for the interest they have to pay to the state through increased lending.<\/p>\n
However, BI revealed on Wednesday that bank loan issuance only grew 7.3 percent year-on-year (yoy) in October, down from September\u2019s 7.7 percent yoy growth, despite the additional liquidity.<\/p>\n
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