Indonesia's Financial Sector Is Stable: KSSK
Jakarta. Indonesia's financial sector was in a normal condition in the first three months of the year as inflation remained tame in line with improving loan conditions and liquidity in the banking sector as well as a stable rupiah against the US dollar, the Financial System Stability Committee, or KSSK, said.
The KSSK is a group of policy makers from the Ministry of Finance, Bank Indonesia, Financial Services Authority (OJK) and the Deposit Insurance Corporation (LPS), who are responsible for taking measures to prevent financial crises in the country.
"Looking forward, stability in the financial system is expected to remain," Finance Minister Sri Mulyani Indrawati said in a statement on Thursday (27/04). This came a day after KSSK's quarterly meeting. The next meeting is scheduled for July.
The average annual inflation rate for the first three months of this year was 3.6 percent, which is still within the central bank's 3 percent to 5 percent target. Loan growth reached 8.6 percent on an annual basis in February, still lower compared with the government 10 percent to 12 percent target. However, bad loans at local banks have shown signs of declining.
The rupiah has also strengthened by 1 percent and traded at 13,299 against the greenback on Thursday, according to Bank Indonesia's Jakarta Interbank Spot Dollar Rate.
Sri Mulyani said strong domestic readings provide Indonesia with a better standing against turbulence in the global financial sector. While global markets could see some relief with cooling political tension in the European Union following the first round of the French presidential election, more risks are lurking ahead, she said.
"The KSSK will monitor development of the United States' global trade policy, which tends to be protectionist; the US tax policy, which will affect the global investment climate; as well as heightened global geopolitical tensions, mainly involving an unpredictable North Korea," she said.
On the domestic side, the KSSK said it will continue monitoring loan disbursement quality, investment inflows, the impact from the change in administered prices to inflation, as well as support expansion at companies and banks.
Besides assessing the country's financial sector, the KSSK also discussed the formulation of the crisis mitigation law's derivative regulations. Among others, the committee discussed the premiums local banks must pay to the Deposit Insurance Corporation annually to pool enough funds to bail out any systemically important banks during a crisis.
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