Bank Indonesia (BI) and the Ministry of Finance have agreed on a burden sharing mechanism to support two major government programs: the Merah Putih Village Cooperative initiative and the national affordable housing plan. Amid concerns over inflation and monetary expansion, BI clarified that the scheme will not involve printing new money. Instead, it aims to ease fiscal pressure while maintaining macroeconomic stability.
Key Facts & Background:
- The burden sharing scheme was announced by BI Governor Perry Warjiyo during a working session with the Regional Representative Council (DPD RI) on September 2, 2025.
- BI and the Ministry of Finance will split the interest costs of government bonds (Surat Berharga Negara/SBN) issued to fund priority programs.
- The programs include:
- Merah Putih Village Cooperatives (Kopdes)
- Affordable housing for 3 million households
- Interest burden sharing breakdown:
- 2.9% each for BI and the Ministry of Finance for housing program
- 2.15% each for Kopdes program
- BI emphasized that no new money will be printed under this scheme.
- The formula involves subtracting returns from government deposits in domestic banks from the 10-year SBN interest rate, with the remainder split equally.
- Additional interest payments are credited to the government’s account at BI, aligning with monetary policy goals.
- Critics raised concerns over inflation risks if BI were to monetize debt, but BI reaffirmed its commitment to monetary discipline.
Strategic Insights: This burden sharing arrangement reflects a calibrated approach to fiscal-monetary coordination in Indonesia’s post-pandemic recovery phase. By splitting interest costs on SBNs, the government gains fiscal space to fund socially impactful programs without overburdening the state budget. BI’s decision to avoid direct monetization addresses inflationary fears and reinforces its credibility in maintaining price and currency stability.
The initiative also signals a shift toward more collaborative financing models for development priorities. The Merah Putih Village Cooperative program and the housing initiative are designed to stimulate grassroots economic activity and address structural gaps in housing access. By leveraging domestic financial institutions and maintaining monetary prudence, the scheme balances short-term stimulus with long-term sustainability.
In the broader context, this model could serve as a template for future public financing—where central banks support fiscal expansion without compromising their core mandates. If successful, it may enhance investor confidence, stabilize the rupiah, and accelerate inclusive growth. For Indonesia, the challenge lies in executing these programs efficiently while preserving macroeconomic discipline in an increasingly complex global environment.