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Bank Indonesia says monetary policies insufficient to maintain economic stability

Tempo - October 5, 2023

Defara Dhanya Paramitha, Jakarta – Bank Indonesia (BI) is taking measures to anticipate the propagation of global crises in Indonesia. Deputy Senior Governor of BI Destry Damayanti stated monetary policies are insufficient to maintain economic stability."This [monetary policies] could only temporarily maintain the stability," Destry said in a national seminar on Wednesday, October 4, 2023. Therefore, the central bank has to contribute to economic growth through macroprudential policies, one of which is the Macroprudential Liquidity Incentive Policy (KLM).

The newest incentive, enforced on October 1, is intended for banks that extend financing to priority sectors in the form of a reduction in the minimum reserve requirement (GWM). BI, Destry said, has increased KLM to 4 percent from the previous 2.8 percent. "So there will be estimated additional liquidity up to Rp160 trillion," she said.

Meanwhile, the priority sectors include the downstream mineral and coal industry, housing including public housing, and tourism including hotels and restaurants. Inclusive financing includes MSMEs, ultra-micro entrepreneurs, and green financing.

In addition to macroprudential policy, the payment system has to be improved to boost security and comfortability for users. "Digital banking shows a tremendous improvement. QRIS has been used by 29 million users with no less than 26 merchants, so the transactions are always on the upward trend," Destry said.

According to Destry, one of the factors to encourage consumption is the efficiency of the transactions through the payment system. Further, policies to develop the financial market and inclusive and green economy also affect economic growth.

Source: https://en.tempo.co/read/1780077/bank-indonesia-says-monetary-policies-insufficient-to-maintain-economic-stabilit