BI to Raise Interest Paid on Government Deposits Under Burden Sharing Deal

Indonesia’s central bank has agreed to a “burden sharing” arrangement with the government, under which it will raise the interest rates paid on government deposits to help fund public programs. Bank Indonesia (BI) spokesperson Ramdan Denny Prakoso said on Thursday that the arrangement is designed to support the government's efforts to raise funds through the bond market for initiatives such as affordable housing and the establishment of cooperatives in villages, according to Reuters. Under the deal, the "burden" will be calculated by evenly splitting the cost of funds on bonds issued for these programs, after deducting any interest the government earns on its deposits with domestic financial institutions. In addition, BI has purchased IDR 200 trillion (USD 12.3 billion) of government bonds in the secondary market, including IDR 150 trillion through a debt switch with the government.