Indonesian lawmakers' panel may drop bid to revise central bank law

BANK INDONESIA / BI - JAKARTA. An Indonesian parliamentary panel is likely to drop a plan to revise the central bank act that analysts have warned could hurt its independence, in favour of debating a new financial sector bill, the panel's chairman told Reuters on Tuesday.

Since late August the legislative panel has fielded recommendations to revise the 1999 law on Bank Indonesia (BI), from expanding its mandate to letting ministers vote at monthly policy reviews and letting it fund fiscal deficits.

The move had pressured the rupiah currency, with investors concerned over the possible extension of the bank's pandemic-led debt monetisation.

The panel has yet to make a final decision, but six parties have said they wanted to shelve the revision plans "to focus on" the financial sector bill, known by the abbreviation RPPSK, said panel chairman Supratman Andi Agtas.

"It's likely the BI bill will be dropped from the 2021 list of priority legislation," Supratman added.

The new bill, submitted for debate last month, aims to reform, develop and strengthen the financial sector and was drafted by the government and parliament's financial committee.

A copy reviewed by Reuters shows the bill aims to widen the central bank's mandate to include economic growth and employment, as well as price stability, and let it buy government bonds directly, in crisis prevention and management efforts.

The new bill lacks a provision to set up a new monetary council with government ministers, however.

While maintaining the central bank as an independent state institution, it says it "must consider the government's general economic policy" in deciding monetary policy.

The new bill is set to be debated after the year-end recess, Hendrawan Supratikno, a member of both the legislative and financial committees, told Reuters