OCTOBERASIA BUSINESS OUTLOOK8NEWSROOMINDONESIA TO IMPROVE LIQUIDITY FOR BANKS VIA LATEST FINANCE BODYSri Lanka's central bank is widely expected to keep interest rates steady on Friday, as it waits for clarity from newly elected President Anura Kumara Dissanayake on his plans to steer the country's recovery from its recent financial crisis. Dissanayake, a Marxist-leaning parliamentarian, was elected on promises to slash taxes, combat corruption, and address the cost of living, garnering support from millions of Sri Lankans.Following his victory, Dissanayake dissolved the parliament and scheduled a general election for November 14. His coalition currently holds only three seats in the 225-member parliament elected in August 2020, and he aims to secure a stronger position in the upcoming election.A majority of analysts, 10 out of 14 surveyed by Reuters, believe that the central bank will leave its Standing Deposit Facility Rate (SDFR) at 8.25 percent and its Standing Lending Facility Rate (SLFR) at 9.25 percent. Economists like Raynal Wickremaratne, co-head of research at Softlogic Stockbrokers, suggest that the current political climate and the stabilization of inflation and growth make it unlikely that the central bank will adjust rates at this time.Two years ago, a severe dollar shortfall plunged Sri Lanka into a financial crisis, driving inflation to 70 percent by September 2022 and forcing the country to default on its foreign debt. However, with support from a $2.9 billion IMF bailout program, inflation has dropped to 0.5 percent as of August, and the economy is projected to grow by 3 percent for the first time in three years. Indonesia is set to launch a central counterparty clearing house (CCP) for foreign exchange and money market transactions next week, aiming to deepen its capital markets. This initiative, led by Bank Indonesia (BI), seeks to integrate the country's fragmented money and foreign exchange markets, improving liquidity for banks and mitigating default risks.The CCP will enhance transaction efficiency, with an anticipated increase in transaction volumes, according to Donny Hutabarat, head of BI's Financial Market Development Department. Currently, market pricing is skewed as larger banks mainly transact with other large banks, creating inefficiencies.The first instrument to be facilitated by the CCP will be Domestic Non-Deliverable Forwards (DNDF), with additional instruments like repo, interest rate swaps, and overnight indexed swaps to be introduced over the next five years. Non-bank entities are expected to participate from 2026 onward.The CCP will be operated by the Indonesia Stock Market Clearing House, BI, and eight major banks: Bank Central Asia, Bank Rakyat Indonesia, Bank Mandiri, Bank Negara Indonesia, Permata Bank, Bank Danamon, CIMB Niaga, and Maybank. These shareholders will contribute to guarantee funds designed to prevent default. BI, while holding shares, will function as a regulator and supervisor alongside Indonesia's financial services authority. SRI LANKA CENTRAL BANK HOLDS INTEREST RATE STEADY AMID FINANCIAL CRISIS
< Page 7 | Page 9 >