HomeBusinessBank Indonesia mandate is in the spotlight as lawmakers debate finance law

Bank Indonesia mandate is in the spotlight as lawmakers debate finance law

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Bank Indonesia mandate is in the spotlight as lawmakers debate finance law
Bank Indonesia mandate is in the spotlight as lawmakers debate finance law

Indonesian lawmakers are resuming discussions on the financial sector reform bill that risks eroding the autonomy of their central bank.

Indonesia has sought to renew its financial sector laws since 2020. Talks stalled due to the pandemic and investor concerns about the central bank’s independence. Since then, Parliament’s finance committee has revived meetings. They have been meeting drafting the so-called omnibus financial sector law since June. Economists and bankers were invited to give their opinion last week.

Indonesia’s bill seeks to limit central bank autonomy

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The latest draft includes adding economic growth and job creation to the central bank’s mandate. These drafts provide a legal basis for Bank Indonesia to buy sovereign bonds in the primary market. It is needed during a financial crisis, according to a recent copy that includes proposals from parliamentary factions.

Other proposed central bank-related changes:

  • The central bank can buy back debt papers. Papers, from the Indonesian Deposit Insurance Corporation to address bank liquidity issues.
  • The largest political faction of the Indonesian Democratic Party of Struggle, or PDIP, is proposing to allow Bank Indonesia’s board of governors. The reason is to extend its five-year terms for a largest of two times, once at present.
  • The second-largest party, Golkar, suggests including the digital rupee as the official currency issued by the central bank.

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