BI Urged to Favor Credit Lines over Market Operations

Jakarta ( JP ). Bank Indonesia ( BI ) should direct more liquidity to productive sectors through credit lines to reduce inflation and bank interest rates, economist Nyoman Moena said. Moena, former BI director, said that central bank’s current policy of market operation through issuing Bank Indonesia Certificates ( SBI ) and buying commercial bank’s money market securities ( SBPU had failed to revive the dying economy ).

“ By using SBIs and SBPUs, BI could not monitor when the money goes. Once the money is disbursed, it may go to speculators, “ Moena said.

BI has pumped a huge amount of liquidity – the total is estimated to be more than Rp. 30 trillion ( US$ 3 billion ) – to cash strapped banks.

Moena said the money remained tight despite such a huge supply of liquidity, indicating that the money had gone to the wrong targets.

                                                                                                            The Jakarta post