"To minimize the negative impact of short-term foreign capital inflows on the monetary stability and financial system the board of governors also decided to change the one-month holding period for SBIs into a six-month holding period as of may 13, 2011," the central bank`s governor, Darmin Nasution, said presenting the results of the board of governors` meeting.
Darmin said the policy was made to prevent speculative short-term funds from entering the country as well as to deepen market through boosting longer-term funds to provide a guarantee in case of a sudden reversal.
Bank Indonesia deputy governor Budi Mulya said the policy was made with full consideration of the country`s monetary conditions and in line with emerging markets` concerns as global economy is still marked by huge flows of capital into emerging markets including Indonesia.
"Besides their positive impacts such as reducing imported inflation, the inflows of short-term funds have to be managed carefully to minimize their negative impact. Why six months. It is because the SBI being offered right now is only the nine month. The policy is effective for domestic as well as foreign holders," he said.
Budi Mulya said the policy would not cause outflows of foreign capital because Bank Indonesia also has another monetary instrument such as one-month, three-month, six-month and nine-month term deposits which could be converted from SBIs.
"This will even minimize the impact of capital flows and prevent vulnerable short-term funds from leaving because capital inflows will keep flowing," he said.
He said total monetary instruments in Bank Indonesia until the end of March reached Rp503 trillion consisting of SBIs worth Rp230 trillion with foreign parties holding Rp77 trillion of it or 30 percent of the total SBI.
Bank Indonesia deputy governor Hartadi A Sarwono meanwhile said the policy was aimed at optimizing and controlling capital inflows so that they would not affect negatively on the country`s economy.
"The policy is issued so that capital inflows could be managed well minimally for six months because SBI is not an investment instrument but a monetary instrument," he said.
(Uu.H-YH/A/HAJM/A014)
Editor: Priyambodo RH
Copyright © ANTARA 2011
