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Finance Minister Purbaya Yudhi Sadewa has ordered state-owned banks to channel 200 trillion rupiah ($12.2 billion) in fresh government funds exclusively into lending, barring bond purchases. The move, his first major policy since taking office, aims to boost credit growth and drive Indonesia’s economy beyond its current 5% growth rate.

FILE PHOTO: Indonesia's newly appointed Finance Minister Purbaya Yudhi Sadewa speaks to journalists after his inauguration at the Presidential Palace in Jakarta, Indonesia, September 8, 2025. REUTERS/Willy Kurniawan/File Photo — FILE PHOTO: Indonesia’s newly appointed Finance Minister Purbaya Yudhi Sadewa speaks to journalists after his inauguration at the Presidential Palace in Jakarta, Indonesia, September 8, 2025. REUTERS/Willy Kurniawan/File Photo

Jakarta, Indonesia – In a bold move to jumpstart Indonesia’s economic engine, Finance Minister Purbaya Yudhi Sadewa announced on Friday that state-controlled banks must deploy 200 trillion rupiah ($12.2 billion) in fresh government funding for lending, explicitly barring its use for bond purchases. This marks the minister’s first major policy shift since assuming office, signaling a decisive push to accelerate credit growth and propel the nation’s economy beyond its current 5% holding pattern.

Purbaya, who took the reins on Monday, has set ambitious targets for Southeast Asia’s largest economy, envisioning growth between 6% and 7% and even hinting that President Prabowo Subianto’s 8% goal is “not impossible.” To achieve this, he is strategically shifting government funds from the central bank to commercial banks, aiming to catalyze a surge in lending activity.

“The goal is to ensure it flows to the real sectors,” Purbaya declared at a press conference, emphasizing the measure’s intent to combat what he termed a “dry” banking system.

A decree issued on Friday mandates that the funds be placed in a “deposit on call” instrument for six months, with the possibility of extension, at a rate pegged to approximately 80.5% of the central bank’s policy rate, which currently stands at 5%. While state lenders currently offer interest rates between 2.5% and 5% for six-month rupiah term deposits, the new measure aims to inject much-needed liquidity into the market.

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Despite the six-month maturity outlined in the decree, Purbaya clarified that the “deposit on call” structure allows the government to withdraw funds at any time to meet operational needs. He also assured that the government’s remaining cash reserves at the central bank would be sufficient to cover its financial obligations through the end of the year.

This injection of capital into state banks represents a significant step towards stimulating economic activity in Indonesia. By prioritizing lending to the real sectors, the government hopes to unlock new opportunities for businesses and individuals, driving growth and prosperity across the archipelago.

Following Friday’s announcement of a massive 200 trillion rupiah ($12.2 billion) injection into Indonesia’s state-controlled banks, details are emerging on the distribution and intended impact of the funds. According to the official decree, the lion’s share will go to three of the nation’s largest lenders: Bank Mandiri, Bank Negara Indonesia (BNI), and Bank Rakyat Indonesia (BRI), each slated to receive 55 trillion rupiah. Bank Tabungan Negara (BTN) will receive 25 trillion rupiah, while Bank Syariah Indonesia (BSI) is set to receive 10 trillion rupiah.

While the funds are designated for a “deposit on call” instrument with a six-month term, economists suggest a longer-term strategy is at play. Brian Lee, an economist with Maybank, a major lender headquartered in Malaysia, believes there’s likely an understanding between the government and the banks that the funds will be rolled over if used for loans.

“The government is likely banking on the money multiplier,” Lee explained, “or the concept that as the extra funds are lent out and cycled through the fractional reserve banking system, the boost to money supply would comfortably exceed the initial (cash) injection.” He highlighted Finance Minister Purbaya’s indication that he might even top up the fund injection in the future.

The decree also stipulates that the banks will be required to sign a partnership agreement with the Ministry of Finance’s treasury department. This agreement will outline the specific rules governing how the funds are utilized. Furthermore, the banks will be obligated to provide monthly reports to the department, detailing exactly how the injected capital is being deployed.

This level of oversight underscores the government’s commitment to ensuring the funds are used effectively to stimulate economic growth. By carefully monitoring the banks’ lending activities, the Ministry of Finance aims to maximize the impact of the injection and drive prosperity across Indonesia.

Indonesia on Edge: Protests Intensify as Deadline Looms for Government Demands

Jakarta, Indonesia – Indonesia faces a critical juncture as widespread protests, fueled by economic woes and political discontent, continue to roil the nation. For weeks, demonstrators across multiple cities have voiced their anger over the weak economy, high unemployment, inequality, and the perceived excesses of lawmakers. Several protests have turned violent, with some demonstrators setting fire to lawmakers’ homes and a regional parliament building. Others have attacked police and security forces, prompting a harsh response from authorities that has further escalated the bloodshed.

The ongoing demonstrations have already claimed the lives of at least ten people, and twenty more have disappeared. Protest leaders have issued a set of twenty-five demands, focusing on critical issues such as removing the Indonesian army from civil matters, reducing lawmakers’ high pay, launching serious investigations into government corruption, and implementing comprehensive measures to bolster economic security. They have set a deadline of Friday for the government to meet these demands, a prospect that appears increasingly unlikely. The potential for escalating violence remains alarmingly high.

President Prabowo Subianto, a former army officer and one-time son-in-law of dictator Suharto, is known for his uncompromising leadership style. Allegations link him to massive human rights abuses during the Suharto regime, resulting in a long-standing denial of a U.S. visa. Given his history and his apparent desire to re-establish the army’s influence in domestic affairs, observers believe he is unlikely to concede to the protesters’ demands.

This tense situation presents a significant challenge for Indonesia. The government’s response in the coming days will be crucial in determining whether the nation can de-escalate the conflict and address the underlying grievances driving the unrest.

A volatile situation in Indonesia threatens to escalate as President Prabowo Subianto appears to abandon earlier concessions and embrace a hardline approach toward widespread protests. Demonstrations, fueled by deep-seated grievances over economic inequality, high unemployment, corruption, and the increasing role of the military, continue to roil the nation.

In a surprising move in late August, Subianto briefly signaled a willingness to compromise. As The New York Times reported, he acknowledged “the genuine aspirations of the public” and pledged to reduce lawmakers’ overseas travel and cut allowances, including a $3,000 monthly housing stipend in a country where GDP per capita hovers around $4,900. He also promised that political parties would remove lawmakers who mocked protesters.

However, this conciliatory stance proved short-lived. Subianto has since reverted to a hardline position, making it clear that he will not remove the army from domestic matters. Concerns are also mounting that he intends to tighten his grip on the economy, potentially exacerbating cronyism and corruption through a new state investment fund with limited oversight.

This week’s dismissal of Finance Minister Sri Mulyani Indrawati, a technocrat widely respected by international investors and seen as a check on Subianto’s spending and statist economic policies, sent shockwaves through the financial markets. The Indonesian stock market and the rupiah immediately declined following her removal.

Subianto replaced Indrawati with Purbaya Yudhi Sadewa, an economist who promises rapid economic growth but lacks the credentials to inspire confidence. Sadewa has echoed Subianto’s ambitious growth targets, suggesting the economy could expand by eight percent within two years – a figure most analysts deem unrealistic. He has also downplayed the protests, dismissed the International Monetary Fund, and admitted his surprise at being appointed finance minister, suggesting he initially thought the offer was a scam.

Subianto’s actions suggest he intends to maintain his expansive spending plans while simultaneously cracking down on dissent. As Abigail McGowan and this author noted in March, he remains committed to financing a new state sovereign wealth fund, Danantara, which will control some of the country’s largest state-owned enterprises, and to expanding the military’s role in civilian government jobs.

Authorities have already detained over 3,000 people, and Subianto’s increasingly aggressive rhetoric, accusing protesters of terrorism and treason, suggests a further escalation in the crackdown. The use of live fire against demonstrators and the deployment of more army troops are distinct possibilities.

Given the protesters’ determination and the persistence of the underlying issues driving the unrest, the potential for further deaths and injuries is high. With over half the population actively using social media, any heavy-handed tactics by the police and army will likely be filmed and rapidly disseminated, potentially igniting further unrest. The coming weeks appear fraught with danger for Indonesia. – omnizers