Since taking office on September 8, 2025, Minister Purbaya has implemented ambitious policies designed to drive Indonesia’s economic growth. One key issue he has addressed is the IDR 233.11 trillion sitting idle in local government funds, currently in banks as of August 2025. He has also rolled out a policy to inject IDR 200 trillion into state-owned banks to strengthen liquidity and promote lending.

These steps are part of a broader strategy to achieve Indonesia’s ambitious 6-8% growth target for 2025 and beyond.

Who is Purbaya & The Momentum of New Policies

Purbaya Yudhi Sadewa is a trained economist-engineer and a graduate of Electrical Engineering from ITB, with an MSc/PhD in Economics from Purdue University. Prior to becoming the Minister of Finance, he served as the Chairman of the Board of Commissioners of the Lembaga Penjamin Simpanan (LPS) since 2020.

Since his appointment, he has emphasized that future fiscal policies will be “pro-growth but cautious”, aiming to avoid market turmoil. He has set ambitious growth targets, including 6% annual growth, and even suggested that 8% growth is not impossible.

Idle Local Government Funds: The Challenge & Paradox

As of August 2025, the Ministry of Finance reports that there is IDR 233.11 trillion in idle local government funds sitting in banks. This unproductive money has not been effectively channeled into projects or economic activities. In Keynesian terms, idle money fails to stimulate the economy.

Minister Purbaya has pointed out that if these funds remain unused, the benefits of government spending will be lost. He has proposed reallocating these funds to productive projects, especially if local governments are not utilizing their budgets efficiently.

The IDR 200T Injection into State-Owned Banks: Mechanism & Expectations

Since September 12, 2025, the government has injected IDR 200 trillion into five state-owned banks (Mandiri, BRI, BNI, BTN, and BSI). This capital injection is not intended for purchasing government bonds but is strictly allocated for real-sector lending.

The funds will be placed in 6-month deposits with interest rates around 80.476% of Bank Indonesia’s (BI) benchmark rate (currently 3.8%). The goal is to keep the banks’ funding costs under control while stimulating lending to the private sector.

Economic Theory Basis: Interest Rates, MEC & Investment

According to Keynesian economic theory, investment decisions are largely influenced by the Marginal Efficiency of Capital (MEC) or expected return. If MEC > i (interest rate), a project becomes viable.

Purbaya’s policy aims to lower interest rates, making more projects financially viable. With increased liquidity, the policy is expected to trigger more investment and economic activity.

Potentials & Challenges of This Policy

Positive Potentials:

• Lower loan rates due to increased bank competition.

• Drives investment and local projects.

• Grows regional economies through private sector involvement.

• Builds investor confidence with clear government support.

Challenges & Notes:

• Extra liquidity may not be effective if credit demand remains weak.

• Risk of funding unproductive projects.

• A delicate balance between aggressive spending and fiscal discipline.

• Poor communication may unsettle markets.

• Local governments may struggle to absorb funds quickly.

Relevance & Strategy for MSO (Mitra Sinergi Optima)

For MSO, these policies present key opportunities in:

1. Project Consulting: Helping design feasible, fundable projects.

2. Investment Advisory: Providing due diligence, risk, and financial analysis.

3. Capacity Building: Training local governments in finance, project management, and governance.

4. Collaboration: Bridging banks, local governments, and projects to ensure smooth credit flow.

Conclusion

Minister Purbaya’s policies – reallocating part of idle local government funds and injecting IDR 200 trillion into state-owned banks – aim to bridge liquidity and investment gaps in the real sector. If carried out with discipline, transparency, and selectivity, this policy could become a catalyst for accelerating Indonesia’s economic growth, potentially reaching the targeted 6-8% growth by 2025 and beyond.