The government has formally changed how it manages its budget surplus funds (SAL), ending a nearly year-long debate over how the roughly Rp 400 trillion (US$22.4 billion) in surplus funds should be managed and put to use. Under Finance Ministry Regulation (PMK) No. 67/2026, excess government cash can now be placed with commercial banks or invested in government securities (SBN), giving the Finance Ministry greater flexibility in managing its cash.

The policy builds on a strategy introduced under then-finance minister Purbaya Yudhi Sadewa, who began moving SAL funds from Bank Indonesia (BI) into state-owned banks (Himbara) in September 2025 to increase banking liquidity and encourage lending. The policy subsequently became the subject of a tug-of-war between the Finance Ministry and BI as the government temporarily withdrew part of the funds from Himbara in June amid pressure on the rupiah, before returning them following concerns over bank liquidity. After Purbaya was removed as finance minister, there was speculation that the SAL funds would instead be returned to BI. The government has chosen a different approach, formalizing the flexibility to place the funds outside BI through PMK 67/2026.

With the new regulation, the Finance Ministry no longer needs to issue a separate Finance Minister Decree (KMK) for every SAL placement. Instead, PMK 67/2026 provides the regulatory basis for placements with commercial banks or investments in SBN, allowing the Finance Ministry to make such placements within the framework established by the regulation. This effectively turns what had previously required individual decisions into a more flexible and repeatable cash-management mechanism.

The case for returning more SAL funds to BI rests partly on the central bank's role in managing liquidity and stabilizing the rupiah. BI has continued to use a combination of foreign-exchange and liquidity-management instruments, including spot, domestic non-deliverable forward (DNDF) and offshore NDF transactions, while maintaining an accommodative macroprudential stance. At its September meeting, BI kept the BI-Rate at 5.75 percent, where it has stood since June, while continuing to emphasize rupiah stability and economic growth.

The pressure on the rupiah has also been reflected in BI's foreign-exchange reserves. Reserves fell from $156.5 billion at the end of 2025 to $144.9 billion in May 2026, before recovering to $146.5 billion at the end of August. That leaves reserves about $10 billion below their end-2025 level. BI said the August position was equivalent to 5.4 months of imports, or 5.3 months including government external-debt servicing, still well above the international adequacy benchmark of around three months.

Against this backdrop, proponents of keeping more government liquidity at BI can argue that doing so would give the central bank greater access to liquidity as it manages external pressures and the rupiah. But this raises a separate question: what has the SAL placement with Himbara actually achieved?

The government initially placed Rp 200 trillion of SAL funds with state-owned banks in September 2025, with the stated aim of strengthening bank liquidity and encouraging lending. The placement was later expanded. In June 2026, Purbaya announced that the government would increase the total placement to as much as Rp 400 trillion through additional Rp 100 trillion placements in two stages. By August, the government had added another Rp 70 trillion, bringing the total government funds in Himbara to nearly Rp 400 trillion, while extending the original Rp 200 trillion placement until July 2027.

The challenge is that additional liquidity does not necessarily translate into additional credit if demand for borrowing is weak. A significant portion of lending associated with Himbara has also been linked to government-backed programs. One prominent example is the Red and White Cooperatives, for which state-owned banks have provided around Rp 240 trillion in loans. The government has committed to repaying the principal and interest through the state budget of around Rp 40 trillion over the six-year loan period.

This does not necessarily mean Himbara lacks the capacity or willingness to lend. Rather, the more relevant question is whether private-sector credit demand is strong enough to absorb the additional liquidity. BI reported Rp 2.6 quadrillion in undisbursed loan facilities in May, equivalent to 22.41 percent of available credit lines, indicating that banks had substantial lending capacity that had not yet been taken up.

At the same time, the broader credit picture is not one of an outright contraction. BI's second-quarter Banking Survey recorded a weighted net balance of 93.08 percent for new credit disbursements, while lending rates also increased during the quarter. This suggests a more nuanced picture: banks are capable of expanding credit and actual lending continues to grow, but unused credit facilities remain substantial. The additional supply of liquidity, including SAL placements, may therefore be running ahead of underlying credit demand rather than being the binding constraint on lending.

This raises a question over whether commercial banks are where those funds are most useful in the current environment. While PMK 67/2026 gives the government greater flexibility to place excess cash in commercial banks or SBN, the underlying question is whether additional liquidity in Himbara is the most effective use of the funds when credit demand remains relatively weak. This is particularly relevant given BI’s simultaneous efforts to manage liquidity and support the rupiah through monetary and foreign-exchange interventions.