Indonesia Watch: BI meeting takeaways – Balancing act

Research evidence excerpt

Indonesia Watch: BI meeting takeaways – Balancing act

Second, BI has been selling short-dated government bonds. Third, as part of broader

fiscal-monetary coordination efforts, MOF has halted its earlier bond purchase program,

which was aimed at capping borrowing costs.

BI is continuing to deepen and encourage greater use of the repo market, as

part of its broader efforts to maintain double-digit base money (MO) growth

and support liquidity. As announced during the Jul policy meeting, BI will provide more

RRR incentives for banks that keep their holdings of SRBI and government bonds, net of

repo, within 19%. See report: Indonesia Watch: BI paused, and instead pushed out a slew

of targeted policy measures 22 July 2026. At the same time, BI intends to keep repo

rates broadly aligned with SRBI yields, such that banks are not disincentivized from

switching between the two instruments.

BI said that effective RRR is presently at 3.6%, against the headline of RRR

(9%), after considering liquidity incentives under the “KLM policy”.

BI signaled a potential increase in the remuneration rate paid on government

deposits held at BI. This would be part of broader fiscal-monetary coordination efforts

aimed at containing government’s debt service burden. Historically, remuneration has

been set at 80% of BI rate. Going forward, BI may raise this to slightly above the BI rate.

BI also said that such a move would not require parliamentary approval, since this is just

a technical recalculation within the same treasury account.

On the reversal of earlier plans for MOF to shift its excess cash from

commercial banks to BI, policymakers observed that banks – particular SOE banks –

had limited repo. As such, a decision was made for MOF to continue rolling over IDR