Issuance of Monetary Instrument Dangerous

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26 February 2007 13:27 WIB

TEMPO Interactive, Jakarta: Iman Sugema, an economist from the Indonesia Awakening Team has said he considers that the plan of Bank Indonesia (BI) to issue a new monetary instrument was risky. The reason for this was, he said, that BI already had the one-month and three-month Bank Indonesia Certificates (SBIs) as its instruments.This is a false and risky policy, said Iman after speaking at the discussion Awaiting Changes in Economic Policy that the Indonesia Awakening Team held yesterday (02/25) in Jakarta. He said he was concerned that the funds saved in SBIs would continue to increase and that the central bank would face difficulties in handling the funds.Previously, BI planned to issue SBI monetary instruments of with longer terms: six and nine months. In addition, the central bank will issue an interbank overnight rate. In other countries, such a rate has been applied and was successful. For the time being, Iman said, total banking funds in SBIs have reached Rp230 trillion. This huge amount of funds cannot be utilized for financing productive economic activities. Should the policy of the central bank be realized, Iman said he was concerned that the real sector would worsen because it still had little access to capital.He also said he hoped that the Finance Minister issue State Treasury Letters (SPNs) soon as an alternative for short term investment. BI would then no longer need to issue three-month to one-year SBIs because it these would be replaced by SPNs. In order to maintain liquidity, it is enough that the central bank organizes daily, weekly and one-monthly SBIs. The Finance Minister has the solution, said Iman.AGUS SUPRIYANTO | SURYANI IKA SARI

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