THE Indonesian government’s decision to inject IDR 200 trillion into the banking industry through state-owned banks association (Himbara) has sparked intense debate among economists. While the move aims to boost liquidity and stimulate economic growth, concerns have been raised about its effectiveness in addressing the current economic challenges.
The primary concern is the significant amount of idle credit in the banking industry.
According to data from the Indonesian Financial Services Authority (OJK), idle credit reached IDR 2.304 trillion in June 2025. This raises questions about the effectiveness of the government’s liquidity injection in stimulating credit growth.
If banks are already struggling to disburse credit, adding more liquidity may not necessarily lead to increased lending.
Another issue
Another issue is Loan to Deposit Ratio (LDR) of Indonesian banks.
Despite the liquidity injection, the LDR has remained below 90%, with a recent decline to 85.34%. This means that banks are not optimally utilizing their liquidity to extend credit to the economy. A low LDR can indicate a lack of confidence in the economy or a shortage of creditworthy borrowers.
The government’s liquidity injection is sourced from the State Budget (APBN). This raises concerns about the impact on the government’s fiscal position and the potential burden on taxpayers.
If the liquidity injection does not lead to increased economic growth, the government may struggle to recover the funds, ultimately burdening taxpayers.
The effectiveness of the government’s liquidity injection policy is questionable.
With idle credit and low LDR, it is unclear whether the additional liquidity will lead to increased lending and economic growth. The policy may only serve to increase the burden on the government’s fiscal position, potentially leading to unintended consequences.
The government’s IDR 200 trillion liquidity injection into state-owned banks is a complex issue that requires careful consideration. While the move aims to stimulate economic growth, concerns about idle credit, low LDR, and the source of funds raise questions about its effectiveness.
To achieve the desired outcomes, policymakers must carefully evaluate the policy’s impact and consider alternative measures to stimulate economic growth.
To improve the effectiveness of the policy, the government should consider the following:
- Targeted credit programs Implementing targeted credit programs could help ensure that the liquidity injection is utilized effectively and reaches the intended beneficiaries.
- Credit guarantee schemes Establishing credit guarantee schemes could help mitigate the risks associated with lending and encourage banks to extend credit to small and medium-sized enterprises (SMEs).
- Economic stimulus packages Implementing economic stimulus packages that focus on infrastructure development, education, and healthcare could help stimulate economic growth and increase the effectiveness of the liquidity injection.
