JAKARTA: Indonesia's central bank raised its deposit facility rate on Friday, part of policy moves aimed at stabilising the rupiah currency and improving the country's current account deficit that doubled in the second quarter.
Bank Indonesia hiked the deposit facility rate -- which is the bottom range for the central bank's monetary operations -- by 25 basis points to 4 percent, aiming to absorb liquidity from the financial system.
It also cut the duration for forward transactions for foreign investors to a minimum of one week, from three months previously, to help stabilise the rupiah.
The rules are aimed at managing the current account deficit to "reach a sustainable level", the bank said in a statement after meeting with government officials.
The move came a day after the bank held its policy rate at a record low of 5.75 percent as it aims to keep economic growth sturdy while stabilising the rupiah, one of the worst performers among emerging Asian currencies this year.
Bank Indonesia expected the current account deficit to improve in the second half of this year to post a surplus in the balance of payments. In the second quarter, the balance of payments was at a deficit of $2.81 billion, more than double the $1.03 billion deficit in the previous quarter.
The current account deficit was $6.94 billion in the second quarter, more than double the 3.19 billion deficit posted in the previous quarter. The second-quarter financial and capital account was at a surplus of $5.48 billion, versus the $2.48 billion surplus previously.
Bank Indonesia also plans to impose minimum down payments for loans provided by sharia financial institutions, while forbidding the use of non-collateral loans for credit down payments.
The government also aims to strengthen the manufacturing industry to help reduce dependency on imported goods to reduce current account deficit, the statement said.
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