Revolutionizing Indonesia‘s Economy: bank Indonesia’s Strategic Stimulus

JAKARTA, Indonesia (Feb. 19, 2025) — Bank Indonesia (BI) has dramatically expanded its economic stimulus package, reaching Rp295 trillion (US$18 billion) by the second week of February 2025. This represents a significant increase from Rp259 trillion at the end of October 2024. The massive injection of funds aims to revitalize key sectors of the Indonesian economy and support President Prabowo Subianto’s ambitious growth agenda.

The stimulus, officially known as the Kredit Likuiditas Makroprudensial (KLM) program, is strategically distributed among various financial institutions.Private banks received the largest share at Rp131.9 trillion, followed by state-owned enterprise (SOE) banks at Rp129.2 trillion, regional development banks (BPD) at Rp28.7 trillion, and foreign bank branches (KCBA) at Rp4.9 trillion.

Launched on January 1, 2025, the KLM program is designed to encourage bank lending to sectors crucial for economic growth and job creation. Priority sectors include agriculture, trade, manufacturing, transportation, warehousing, tourism and the creative economy, construction, real estate, public housing, micro, small, and medium enterprises (MSMEs), ultra-micro enterprises, and green initiatives. BI Governor Perry Warjiyo highlighted the bank’s commitment to this initiative.

“Until the second week of February 2025, BI has provided this incentive of Rp295 trillion (US$18 billion), an increase by Rp36 trillion from Rp259 trillion at the end of october 2024,”
Perry Warjiyo, February 19, 2025

A key focus is bolstering the housing and agricultural sectors. BI is actively coordinating with the government to ensure the success of President Subianto’s programs. This collaboration is particularly evident in the expansion of the Housing Financing Liquidity Facility (FLPP) program.

“This is to encourage credit growth or banking financing in priority sectors, including the housing and agricultural sectors,”
Perry Warjiyo

The FLPP program, traditionally funded by the state budget (APBN), will receive a significant boost through the KLM initiative. This aims to dramatically increase the number of houses financed under the program.

“FLPP has so far been funded by the APBN (state budget). But to push it further, what if the funds came from KLM? that’s what we formulated,”
Perry Warjiyo

The projected impact of this reallocation is substantial. BI anticipates that maximizing the KLM program will increase FLPP financing from 170,000 houses to 270,000,with a further goal of reaching 400,000 houses. This ambitious target underscores the government’s commitment to addressing Indonesia’s housing needs.

moreover, BI is actively collaborating with relevant ministries and institutions to support President Subianto’s agricultural initiatives, focusing on downstreaming and food security. This thorough approach ensures that the KLM program’s impact extends across multiple sectors.

“we will discuss our programs with related ministries and institutions so that the programs will run, then the credit can run, and we provide the liquidity incentives,”
Perry Warjiyo

The substantial increase in the KLM program signifies a significant commitment from BI to stimulate economic growth and job creation in Indonesia, aligning with the government’s broader economic development strategy.

Interview: revolutionizing Indonesia’s economy Through Bank Indonesia’s Strategic stimulus

Senior Editor, World Today News: what transformative impacts dose Bank Indonesia’s latest stimulus have on Indonesia’s economy, especially in the context of supporting President Prabowo Subianto’s growth agenda?

Expert on Economic Stimulus and policy: Bank Indonesia’s latest stimulus package is a bold move that signifies an unparalleled commitment to reshaping the economic landscape in Indonesia. By dramatically increasing the funds to Rp295 trillion, or approximately US$18 billion, from Rp259 trillion previously, Bank Indonesia (BI) is signaling strong support for pivotal sectors.

this strategic injection of funds is designed not just to revitalize these sectors but to align with President Prabowo subianto’s enterprising growth agenda. The focus on sectors such as agriculture,manufacturing,and green initiatives is critical. These sectors are foundational to sustainable growth and job creation,addressing both short-term economic needs and long-term developmental goals. For example, supporting agriculture ensures food security and rural employment, which are pillars of economic stability in Indonesia.

Senior Editor, World Today News: Given the distribution across various financial institutions, how will this impact the broader economic surroundings and financial services in Indonesia?

Expert on Economic Stimulus and Policy: The distribution strategy behind the Kredit Likuiditas Makroprudensial (KLM) program is meticulously crafted to optimize economic impact. By allocating the largest share to private banks (Rp131.9 trillion), BI intends to leverage these institutions’ expansive networks and expertise for extensive economic reach.State-owned enterprises (SOEs) and regional development banks also see meaningful funding, reflecting their crucial role in strategic sectors and regional development.

Moreover,this allocation ensures that the stimulus reaches diverse parts of the financial ecosystem,from major urban centers managed by private banks to the rural areas served by regional development banks. it underscores BI’s objective to foster an inclusive economic growth model, ensuring that even geographically isolated areas benefit. the diversity in fund allocation drives not only economic inclusivity but also a competitive yet collaborative financial services environment, promoting innovation and efficiency across the sector.

Senior Editor, World Today News: How does the KLM program specifically encourage credit growth in priority sectors, and what are the anticipated outcomes?

Expert on Economic Stimulus and Policy: The KLM program’s design is inherently geared towards stimulating credit growth in sectors identified as engines for economic advancement and employment. By directing funds towards areas like housing, agriculture, and the green economy, BI is setting the stage for transformative development.

Indonesia’s focus on housing through the Housing Financing Liquidity Facility (FLPP) is notably noteworthy. The plan to increase housing financed under FLPP from 170,000 to possibly 400,000 houses represents a significant step toward addressing Indonesia’s urban and rural housing shortages. This spike in housing development not only provides immediate construction jobs but also contributes to long-term economic stability by enabling more individuals and families to settle into stable living conditions.

In agriculture, investing in downstreaming and food security reduces dependency on imports and builds a more self-sufficient agricultural sector. These initiatives support farmers and associated industries,propelling growth entirely from the grassroots level. The anticipated outcomes extend beyond mere economic numbers; they encompass improved quality of life and enhanced economic resilience across Indonesian society.

Senior Editor, World today News: can you elaborate on the collaborative efforts between BI, the government, and other institutions to ensure the success of these economic initiatives?

Expert on economic Stimulus and Policy: Collaboration and coordination are the bedrocks of the strategic initiatives laid out by Bank Indonesia.BI’s partnership with the government and relevant ministries ensures that the theoretical benefits of the stimulus translate into real-world outcomes.

For the FLPP and agricultural programs, BI works closely with government agencies to streamline implementation processes, aligning financial support directly with project needs. By convening discussions with relevant ministries, BI ensures a cohesive approach. These collaborations facilitate direct line access from policy-making to execution, effectively bridging gaps that could otherwise hinder progress.

Through this tri-fold collaboration framework between the central bank, governmental bodies, and internal institutions, we can anticipate an expedited flow of credit to intended sectors and a more thorough reach in execution. Notably, these partnerships amplify BI’s role from a financial regulator to an active participant in the nation’s economic reform, setting a precedent for future initiatives.

Senior Editor, World Today news: What does this mean for Indonesia’s push toward becoming a more self-reliant economy, especially in sectors like the green economy and MSMEs?

Expert on Economic Stimulus and Policy: The emphasis on the green economy and micro, small, and medium enterprises (MSMEs) within the KLM program highlights Indonesia’s commitment to sustainable and inclusive growth. MSMEs, in particular, are the backbone of the Indonesian economy, employing a significant portion of the population. Financial liquidity provided by the KLM program empowers these small enterprises to innovate, scale operations, and improve productivity, essential components of economic competitiveness in a global environment.

Likewise, the prioritization of green initiatives demonstrates Indonesia’s forward-thinking approach to economic development. Investing in renewable energy projects, sustainable agriculture, and eco-kind infrastructure lays the groundwork for a resilient economy that balances growth with environmental stewardship. By fostering a green economy,Indonesia not only advances its industrialization process but also aligns with global sustainability goals.

Bank Indonesia’s strategic stimulus is an evolution in economic policy—one that’s intricately designed to ensure that growth is both robust and inclusive. Through concerted efforts and innovative strategies, Indonesia is well on its way to solidifying its role as a self-reliant economy. With the continued success of these interventions, we can anticipate a transformative period in Indonesia’s economic narrative.

Call to Action: As Indonesia embarks on this ambitious economic journey, we invite our readers to reflect on how these transformative policies can be mirrored in other developing economies. Share your thoughts, insights, and experiences in the comments below or on social media to continue this vital conversation.