Cut In Holding Period For SBI To Draw Investment

Mamuju, W Sulawesi (Antara Bali) - Bank Indonesia Governor  Agus Martowardojo said the decision to cut the holding period for Bank Indonesia Certificate (SBI) from one month to a week is to draw foreign investment  into the country.

The central bank has decided to cut the SBI holding period by foreign investors to keep the availability of foreign exchange in the country, Agus said here on Thursday.

Earlier the government ruled longer holding period of SBI by foreign investors to prevent too much hot money .

"We prepare instruments to draw foreign funds into the country as this is one of the challenges being faced by  Indonesia," Agus said .

The cut in holding period is an instrument used by the central bank as part of the the new economic policy package announced on Sept 30 by the government, he said when officially opened a Bank Indonesia Representative office in this West Sulawesi capital.

Other instruments included issuance of  foreign exchange denominated  Bank Indonesia securities, incentive for exporters in the form of cut in interest tax on foreign exchange deposits put in Indonesian banks, he said.

Cut in interest tax on deposits is also offered for exporters converting their foreign exchange deposits into rupiah, he added.

Bank Indonesia will also improve transparency  in the use of foreign exchange with reports about foreign exchange flows, he said.

Agus said with the cut in SBI holding period by foreign investors, banks are expected to no longer suffer shortage in foreign exchange reserve especially US dollar as what has happened at present that puts  pressure on rupiah.

Bank Indonesia seeks to protect rupiah through intervention in forward market to keep balance in supply and demand  and reduce the pressure on the national currency  on the spot market.  

In order to control rupiah liquidity the central bank  would issue three-month Bank Indonesia Deposit Certificate (SDBI).

The issuance of the open market operation instruments is expected to absorb liquidity toward investment in longer term instrument.  

The shift in liquidity toward longer term is expected to reduce the risk of the excessive use of rupiah liquidity for activities that would increase the pressure on rupiah.

The Bank Indonesia's policy package  would create  synergy with the government's economic policy package, Agus said.

 All series of policy  are expected to be  implemented effectively  and  immediately to shore up the flagging economy. (WDY)