Efforts to Maintain Exchange Rate Stability May Lead to Tight Banking Liquidity
JAKARTA, investortrust.id – Indonesia’s banking sector may face short-term liquidity challenges as Bank Indonesia (BI) implements policies to stabilize the rupiah by attracting foreign capital through its high-yield Rupiah Securities (SRBI).
“Our immediate concern is market risk, but we foresee liquidity risk emerging as a significant challenge at least through the first half of this year,” said Leo Putera Rinaldy, Chief Economist at PT Bank Negara Indonesia, during a media briefing in Jakarta on Monday (January 13, 2025).
A notable shift in perception among bankers has emerged: the SRBI rate is increasingly viewed as the de facto benchmark interest rate, replacing the BI rate. This shift stems from the SRBI’s significantly higher returns, making it more attractive to investors.
While the BI Rate has remained steady at 6%, the SRBI rate has climbed from 6.8% in September 2024 to 7.3% this year, further cementing its role as a market benchmark.
“The market now perceives the SRBI rate, not the BI rate, as the true benchmark,” Leo explained.
The elevated SRBI rate, while effective in drawing foreign capital, poses liquidity challenges. High SRBI yields encourage financial institutions to park excess rupiah liquidity with BI rather than channeling it into loans or the real economy.
Rinaldy noted that rupiah liquidity placements at BI’s monetary operations have surged to Rp 1,000 trillion, more than double the typical range of Rp 300–400 trillion.
“When will these funds exit SRBI and flow back into the real economy?” Leo asked. “As long as the rupiah exchange rate hovers near Rp 16,000 per US dollar, it will be difficult for BI to lower the SRBI rate.”
Chief Economist of PT Bank Negara Indonesia (BNI) Leo Putera Rinaldy. Photo: Investortrust/Primus Dorimulu
Leo highlighted BI’s primary focus on stabilizing the rupiah exchange rate in the short term. By keeping SRBI rates high, BI aims to attract foreign capital, cushioning the rupiah from external pressures.
“Given the current situation, we anticipate tight rupiah liquidity through the first half of the year,” Leo said.
While this strategy supports the rupiah, the tight liquidity could impact the broader economy. BI’s challenge will be to balance its currency stabilization efforts with ensuring sufficient liquidity to support domestic economic activity.
As the banking sector adjusts to these dynamics, the focus remains on how soon BI can recalibrate its monetary policy without jeopardizing exchange rate stability.