Jakarta, IDN Times – Bank Indonesia (BI) has reported that the position of base money (M0) reached Rp2,232.2 trillion in April 2026, marking a 14.3 percent year-on-year (yoy) growth. While this figure remains positive, it indicates a notable slowdown compared to the previous month, when M0 growth soared by 16.8 percent yoy. This moderation in growth underscores the dynamic nature of Indonesia’s monetary landscape.
The decelerating pace of M0 growth is primarily attributed to a slowdown in commercial bank demand deposits and an adjustment in the circulation of physical currency. Despite this shift, Bank Indonesia assures that liquidity within the banking system remains robust and well-maintained. Below, Bank Indonesia provides a detailed explanation regarding the factors influencing this slowdown in base money growth.
1. Reasons for the Slowdown in Growth
According to Ramdan Denny Prakoso, Executive Director of Bank Indonesia’s Communication Department, this development was significantly influenced by two key components. Firstly, the growth of adjusted commercial bank demand deposits at Bank Indonesia registered a 21.6 percent (yoy) increase. Secondly, the amount of currency in circulation expanded by 14.6 percent (yoy). These factors collectively contributed to the observed trend in M0.
“Based on the influencing factors, the growth of M0 Adjusted has already factored in the impact of providing liquidity incentives, which are part of our adjusted monetary control measures,” Prakoso emphasized. This highlights BI’s proactive approach to managing financial stability and liquidity in the Indonesian economy.
2. Understanding M0 at Bank Indonesia
M0 Adjusted represents the total sum of cash and bank deposits held at Bank Indonesia. This figure is specifically adjusted to filter out any temporary effects stemming from special BI policies, such as the strategic provision of liquidity incentives. This adjustment ensures a clearer and more accurate reflection of underlying monetary conditions.
To grasp this concept more simply, one might envision M0 as the water flowing in a river. Periodically, Bank Indonesia, much like a dam operator, temporarily adds more water (money) to the system to meet specific needs. This could involve injecting “additional liquidity” into banks to ensure the smooth and efficient functioning of the overall banking system, maintaining financial equilibrium.
3. An Illustration of Base Money Creation
Let’s consider a practical example to illustrate the creation of base money. Imagine an Indonesian exporter who receives a payment of $1 million USD in the form of an export bill, with an exchange rate of Rp5,000 per dollar. The exporter then sells this export bill to Bank A. In this transaction, the exporter relinquishes their claim to the $1 million USD, and in return, Bank A credits the exporter’s account with Rp5 billion.
Should the exporter choose not to withdraw this money in cash, the subsequent step involves Bank A selling that same export bill to Bank Indonesia. Bank A, in turn, surrenders its right to the $1 million USD, and Bank Indonesia adds Rp5 billion to Bank A’s demand deposit account balance at BI. This crucial addition directly leads to the creation of Rp5 billion in base money within the economy.
From this vivid illustration, it becomes clear that regardless of whether the exporter converts their funds into physical cash or leaves them as a deposit, base money is nonetheless created. This foundational money can manifest either as Bank A’s demand deposit account balance held at Bank Indonesia or as the physical cash received by the exporter, serving as a critical component of the nation’s monetary aggregate.
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Summary
Bank Indonesia reported that the base money (M0) reached Rp2,232.2 trillion in April 2026, reflecting a 14.3 percent year-on-year growth. This figure represents a slowdown compared to the 16.8 percent growth recorded in the previous month, driven primarily by adjustments in commercial bank demand deposits and changes in physical currency circulation. Despite this deceleration, the central bank maintains that overall liquidity within the banking system remains robust and stable.
The M0 figure is adjusted by Bank Indonesia to account for specific monetary policy measures, such as the provision of liquidity incentives, ensuring a clearer view of underlying economic conditions. Base money is created through institutional processes, such as when Bank Indonesia purchases foreign exchange assets from commercial banks, thereby increasing the deposit balances held by those banks at the central bank. This fundamental component of the monetary aggregate ensures the efficient functioning of Indonesia’s financial system.
