Finance Minister Sri Mulyani Indrawati explained that the funding will be utilized to boost the local economy hit by the COVID-19 pandemic.
"It (the funding) is ready for disbursement, and it is aimed at boosting the local economies," Indrawati stated during the inking of a partnership agreement to deposit the state's funding for national economic recovery here on Monday.
The minister elaborated on the funding segregation, with some Rp2.5 trillion placed in BPD BJB, Rp2 trillion in BPD Jakarta, Rp2 trillion in BPD Central Java and BPD East Java respectively, and Rp1 trillion in BPD SulutGo.
The government is yet studying the funding placement in BPD Bali and Yogyakarta worth Rp1 trillion respectively.
The funds will be kept in deposit accounts at interest rates of 80 percent of the central bank’s 7-Day Reverse Repo Rate.
The minister advised the banks against utilizing the money to buy Government Securities (SBN) or piled up foreign currencies.
"It should not be used to buy SBN and foreign currencies. The money must be channeled to boost our economy," she reiterated.
Indrawati also urged the banks to divert the loans to the production sector at a lower interest rate.
"Hence, if we deposit Rp2 trillion in BPD DKI Jakarta, we are upbeat about the bank being able to disburse Rp4 trillion of credit with a lower interest rate," she noted.
The government is following through on its promise to allocate fund placements in banks worth Rp82.2 trillion to help their liquidity, as they conduct credit restructuring for micro, small, and medium enterprises (MSMEs) and labor-intensive businesses affected by the pandemic.
The funds will initially be deposited in all state-owned banks: Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), and Bank Tabungan Negara (BTN).
In June, the government had announced that it deposited Rp30 trillion (US$2.12 billion) in the state-owned banks, associated under the auspices of Himbara.
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