Indonesian Bill Will Emphasise Central Bank's Role Supporting Growth, Lawmakers Say

Source: Reuters | Editor: Yudho Winarto

BANK INDONESIA / BI - JAKARTA. Indonesia's parliament is discussing changes to an existing bill that could strengthen the requirement of the central bank to support growth and also give parliament the power to recommend the removal of the bank's governor, lawmakers said on Tuesday.

The parliament's financial commission is looking at changes to a 2023 financial sector law, after the Constitutional Court ordered lawmakers to review the legislation on matters related to the independence of the state deposit insurer agency.

Local news website Kontan on Tuesday reported a draft of the revised bill includes an additional clause saying that Bank Indonesia "in achieving its goals, implements policy and policy mixes that create an economic environment conducive to real sector growth and job creation."

Mohamad Hekal, deputy head of the parliamentary commission, would not comment on changes to BI's mandate beyond saying the bill would emphasise its role in promoting economic growth, but said other changes, including the power to dismiss the central bank's board of governors, were being discussed.

Allowing parliament to evaluate BI's board members and recommend to the president that a member be removed based on performance were among the changes being considered, he said.

Currently, board members can only be removed if they resign, are convicted of a crime or are mentally or physically unable to perform their duties.

The head of the parliamentary commission, Mukhamad Misbakhun, said BI's performance as a state institution should be evaluated "even when we do not want to disrupt the institution's independence".

The commission has made no final decision and it would hear expert opinion related to the bill next week, he said, adding that the bill would undergo a long legislative process that includes discussions with the government at a later stage.

Finance Minister Purbaya Yudhi Sadewa said he has not seen the bill, but speculated that parliament may want BI to work in support of full employment like the U.S. Federal Reserve. He also underlined that the central bank is independent of the government.

The 2023 financial law widened BI's mandate to include supporting sustainable economic growth. Prior to that, the central bank's sole goal was maintaining the value of the rupiah, which had been understood to include curbing inflation.

BI did not respond to requests for comment.

In March, when there was talk about changes to the law, BI Governor Perry Warjiyo said any revisions would emphasise how BI pursued its objectives, without changing the construction of the law.

Concerns about the independence of the central bank have been mounting this month following the announcement of a "burden sharing" deal that will see BI increase the interest it pays on government deposits to fund state programmes, as well as the sacking of respected finance minister Sri Mulyani Indrawati.