Jakarta. Indonesia’s Finance Minister Purbaya Yudhi Sadewa said the government’s Rp 200 trillion ($12 billion) liquidity injection into state-owned lenders has been 94 percent absorbed as of the end of October, strengthening domestic liquidity and supporting credit expansion in Southeast Asia’s largest economy.

Speaking at the Finance Ministry’s state budget (APBN) briefing on Thursday, Purbaya said Rp 188 trillion had been distributed as loans by banks under the state banks network --BNI, BRI, Mandiri, BTN-- and by sharia lender Bank Syariah Indonesia since the funds were placed on Sept. 12.

“By October 31, Rp 188 trillion of the Rp 200 trillion placement had been channeled into credit,” he said, calling the pace of absorption a sign of improving financial conditions.

According to the minister, the liquidity boost helped steady third-party funds (DPK) or deposits, which grew 11.5 percent in October, while credit growth reached 7.4 percent. He added that the full effects of the injection typically appear after a two- to three-month lag.

“We expect to see the complete impact in December or January. But the signs are clear, DPK is growing in double digits and lending has strengthened, particularly investment loans,” he said.

The intervention has also achieved its goal of reducing banks’ cost of funds. Six-month deposit rates dropped sharply from 6 percent to 5.2 percent in September. Purbaya said continued easing should eventually feed through to lending rates.

Weighted average lending rates fell to 9 percent in October, compared with 9.12 percent in July, signaling that funding-cost relief is beginning to reach borrowers.

He added that the government decided to inject an additional Rp 76 trillion on Nov. 10 after observing a slowdown in base money growth, from 13.3 percent earlier to 7.8 percent in October. The fresh funds were allocated to BRI, Mandiri, BNI, and regional lender Bank DKI.

“We saw base money growth soften, so we felt another push was needed. We injected Rp 76 trillion, Rp 25 trillion each into the state-owned banks and Rp 1 trillion into Bank DKI,” Purbaya said.