Jakarta (ANTARA News) - Bank Indonesia has asked the government to immediately spend redemption fund it earned from the tax amnesty program to forestall impact of liquidity tightening by banks.

By Sept. 30, the government earned Rp97.2 trillion from its tax amnesty program as penalty with repatriation under the tax amnesty program at Rp137 trillion.

Executive Director for Economy and Monetary Department of the Central Bank Juda Agung said until end of September, bank deposits or third party funds, held by banks, continued to shrink.

Juda estimated that third party funds held by banks fell 2-3 percent year-on-year until end of September after falling 5 percent in August.

"This is a matter of time . If the government spends the money the trend would reverse and gradually more funds would return to the banking system," he said.

He predicted the third party funds in bank could grow 7-9 percent by the end of this year if the government spends all of the redemption funds with repatriated funds entering the countrys banking system.

By Sept. 30 or the end of the first period of the tax amnesty program repatriation of funds parked abroad by Indonesian tax payers reached Rp137 trillion.

The tax amnesty program is entering its second period from Oct 1 until Dec. 31 this year to be followed with the third or last period from January 1 to March 31 , 2017.

Juda said during the first period of the program from July to September, bank liquidity was under pressure as many tax payers withdrew their fund from banks to pay for the redemption.

The fund outflows from banks were not comparable with the fund inflows in repatriated funds, he said.

He said repatriation is expected to be significant in improving bank liquidity only by the end of 2016.

"Repatriation is expected only to have its effect in December , while in September, October and November banks need liquidity," he said.

Proportionally , bank credit growth in August slowed to 6.7 percent year on year from 7.6 percent in July yoy.

Juda predicted repatriation could reach a total of Rp200 trillion by the end of this year that banks are expected to be flooded with fresh funds in the first quarter of 2017.

In the first quarter of 2017 third party funds held by banks would reach 1.5 percent - 1.7 percent of the countrys Gross Domestic Product (GDP).(*)

Editor: Heru Purwanto
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