Indonesia’s state banks fund construction surge as central bank chief departs

Indonesia’s central bank chief abruptly resigned after 8 years, stirring speculation that President Prabowo Subianto wants more intervention by his administration and looser monetary policy.

Meanwhile, Subianto’s administration is applying a fiscal lever via state banks: construction loans are flowing into the economy, as our preferred higher-frequency proxy – cement consumption – shows in our chart.

Almost a year ago, finance minister Purbaya Yudhi Sadewa injected about USD 12 billion into the state banks, expecting that liquidity to be deployed to the private sector in such a manner. Recent reports suggest that disagreements over this and other policies helped speed Perry Warjiyo’s departure from Bank Indonesia.