VIVAnews - Member of Commission XI at the House of Representatives (DPR), Dradjad H Wibowo, suspected that it will still be difficult for banks to cut their interest rate although Bank Indonesia (BI) has cut the BI Rate. It occurs due to the depreciating Rupiah as well as the issuance of global medium term notes which is considered as expensive.
Wibowo said the issuance of the Indonesian global medium term notes is 275 basis points higher compared to the global bonds issued by Philippines. "It creates a new benchmark and will cause banks to face difficulties in lowering the interest rate," he said.
Wibowo concluded that should Bank Indonesia cut the BI Rate by five percent, it is possible that banking would not follow. If banking cuts fixed deposit's interest rate, it is worried that consumers would choose sukuk or state bonds.
The issuance of the global medium term notes valuing to US$3 billion has resulted in the modified benchmark of Indonesian financial market. "DPR has already warned the government not to expand the deficit," he said.
In the global medium term notes issuance, the recorded offering reached US$7 billion of the targeted US$1.5 billion to US$2.5 billion. But the government only gained US$3 billion.
The global medium term notes has already been listed on Jan. 28 2009 and it was a follow-up on a series of meetings with investors held on Feb. 2-12 2009.
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Translated by: Ariyantri E. Tarman
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