Jakarta. Indonesia's newly minted gold bullion banks are expected to give a multibillion-dollar boost to the country's economy, according to President Prabowo Subianto.

Prabowo officially launched Indonesia's first-ever bullion banks in Jakarta on Wednesday in another move to catapult the country's growth. State-run entities, namely the pawnbroker Pegadaian and sharia bank Bank Syariah Indonesia (BSI), will run the bullion services. Bullion banks engage in the trade and management of precious metals, including gold. The banks have become Prabowo's strategy to take better advantage of the country's substantial gold reserves, which the government revealed to be the sixth largest of its kind in the world.

"We believe that [the gold banks] can add Rp 245 trillion [nearly $15 billion] to our gross domestic product [GDP] and create 1.8 million jobs. It can help boost and save our foreign exchange reserves," Prabowo said.

"... Because the gold [that we mine] will be processed and saved in the country. The gold will not flow out of [Indonesia]. These bullion banks will also improve our monetary stability through gold liquidity mechanisms," the retired army general said.

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Prabowo previously revealed that the resource-rich Indonesia had been storing many of its gold offshore.

Pegadaian was the first one to secure approval from the Financial Services Authority (OJK) to run the bullion services. Pegadaian's services now include letting customers to trade gold and even make deposits using the precious metal. BSI officially secured OJK's approval for gold bullion services early this month. BSI is the result of a merger between the sharia units of three government-run lenders: BNI, BRI, and Mandiri. The merged bank allows its customers purchase gold in installments while making sure that its transactions comply with the Islamic law.

According to State-Owned Enterprise Minister Erick Thohir, Indonesia has 2,600 tons of gold reserves. Government estimates claimed that annual gold production had jumped from 100 tons to 160 tons. However, Indonesia's reserves of gold bars only stand at around 201 tons, still lagging behind Singapore. The close neighbor has 228 tons of gold bar reserves.

"There are also approximately 1,800 tons of gold circulating among the public. Some people out there put their gold under their pillow and near the toilets," Erick said, while adding that the bullion services would prompt Indonesians to store their gold in formal financial systems.

Prabowo wants to record an 8 percent annual GDP growth before his term ends in 2029. The Central Statistics Agency (BPS) data shows that the Indonesian economy had grown by 5.03 percent throughout 2024, quite far from Prabowo's target.

The gold banks' launch came just a few days after the president officially established the country's second sovereign wealth fund Danantara, which also has an overarching goal to drive the economy. Danantara will manage the assets of the country's state-run enterprises, and invest in strategic projects such as nickel processing.

Prabowo not long ago inked a policy that would require the country's resource exporters to hold its proceeds onshore for at least a year. This new rule, which is set to come into effect next month, will grow Indonesia's foreign exchange reserves by $80 billion in 2025.

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