Jakarta. Finance Minister Purbaya Yudhi Sadewa said Friday that the impact of his policy to shift Rp 200 trillion ($12 billion) in state funds from the central bank to state-owned banks should become evident within one to two weeks.

All eyes are now on Purbaya after he transferred part of the government’s cash reserves at Bank Indonesia to five state banks last week to boost credit growth. Mandiri, BRI, and BNI each received Rp 55 trillion, while the state mortgage lender BTN was allocated Rp 25 trillion and the Islamic bank BSI Rp 10 trillion.

Purbaya said that the massive fund injection would encourage banks to slash their interest as they compete with another to gain potential borrowers. This will eventually encourage people and enterprises to borrow the money.

“So supply and demand will rise. I know it doesn't take a day or two for this to happen. I’m almost certain that we can start seeing the effects within one or two weeks. … After one, two or three months, we shall see the [effects] of my monetary policy in full swing,” Purbaya told a news conference in Jakarta.

Danantara, the sovereign fund that has brought all state companies under its command, not long ago said they wanted the banks to issue productive loans, even setting several criteria. The fund’s boss Rosan Roeslani told reporters Monday that the borrowers should use the money for “export-oriented and job-making activities”.

Purbaya said that Indonesia had tested this method when it grappled with the Covid-19 pandemic. He claimed that this was what had kept Indonesia’s economy resilient during the hard times, saying that “it was all thanks to fiscal and monetary intervention”. 

In May 2021, the government shifted around Rp 300 trillion from the cash reserves to the banking system, according to Purbaya’s recent statements to lawmakers. Reports showed Indonesia’s economy grew 3.69 percent in 2021, and expanded at a much faster pace of 5.31 percent in 2022. 

Early this month, Purbaya joined the cabinet to replace Indonesia’s second-longest serving finance chief Sri Mulyani. Indonesia reported that its nationwide bank credit disbursement rose 7.56 percent year-on-year (yoy) in August, quite an improvement from the 7.03 percent yoy growth the previous month. However, Bank Indonesia’s governor Perry Warjiyo admitted that the credit expansion was “not strong enough” to boost the economy.