Bank Indonesia Rate Maintained at 7.5%

TEMPO.CO, Jakarta - The Bank Indonesia (BI) Board of Governors decided on Monday to maintain its benchmark interest rate (BI rate) at 7.5 percent.

"We have decided to maintain the BI rate at 7.5 percent for the budgetary projection," BI Governor, Agus D.W.Martowardojo, said on Monday.

After considering the circumstances and the data collected and processed by Bank Indonesia, the BI rate was kept at 7.5 percent.

"The realization can be different to what has been budgeted due to projections and posture formation," he said.

Earlier, BIs Board of Governors had decided to maintain the BI rate at 7.5 percent, while maintaining the Deposit Facility rate at 5.5 percent and the Lending Facility rate at 8 percent.

In the midst of the global economic crisis, Martowardojo has optimized monetary operations, both in the rupiah and foreign exchange markets.

In addition, BI continues to strengthen coordination with the government to speed up fiscal stimulus to boost economic growth.

Finance Minister Bambang Brodjonegoro had said earlier that an acceleration in the utilization of regional funds by regional governments could fuel national economic growth.

"Regional governments should now begin working so that regional transfers of funds in the form of special allocation funds (DAK) or general allocation funds (DAU) have a positive impact on growth. If regional governments immediately use half of the funds, it will have a significant impact," Brodjonegoro said.

He added that between 2011 and June, 2015, regional government funds amounting to Rp273.5 trillion had remained unused in banks. This amount could potentially increase if regional governments found no use for these funds.

This condition could also hamper the funding of regional expenditures, particularly capital expenditures to build infrastructure facilities needed to encourage and improve economic performance, he said.

"Regional governments are still lacking in efforts aimed at creating a stimulus, even though the unspent funds have extraordinary potential to stimulate the economy. The funds should therefore not remain unused in banks," the minister stressed.

The central government has announced its draft budget for 2016, which has been set at Rp2,121.3 trillion, comprising of central government spending of Rp1,339.1 trillion, spending on ministries and state institutions pegged at Rp558.7 trillion and transfers to regions and villages estimated at Rp782.2 trillion.

The Rp782.2 trillion transfers to regions and villages rose by about Rp117.6 trillion, compared with the same funds allocated in the revised 2015 State Budget, which amounted to Rp664 trillion.

The transfers to regions and village funds in the draft 2016 state budget have surpassed the allocation of funds earmarked for ministries/institutions expenditures for the first time and were pegged at Rp780.4 trillion.

ANTARA