TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
‘Bill will push central bank into dark age’: Experts voice concerns over BI Laws revision
The draft revision also scraps all existing articles stipulating BI’s independence in monetary policy making, which it was granted in the wake of the Asian financial crisis to help ensure the country had a prudent central bank.
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
The logo of Bank Indonesia is seen in front of the central bank's building in Jakarta. Experts and rating agencies have voiced their concerns over the recent draft revision of the Bank Indonesia (BI) Law, which is feared will undermine the central bank’s independence and prudence amid the economic risks the country faces during the COVID-19 pandemic. (JP/Rafaela Chandra)
E
xperts and rating agency have voiced their concerns over the recent draft revision of the Bank Indonesia (BI) Laws, which is feared will undermine the central bank’s independence and prudence amid the economic risks the country faces during the COVID-19 pandemic.
The bill, which was proposed by the House of Representatives’ legislation body, states that the central bank’s mandate will be to manage the rupiah exchange rate and inflation as well as boosting economic growth and helping to ensure sustainable job creation. The prevailing laws mandate BI to manage inflation and the rupiah exchange rate.
The draft revision also scraps all existing articles stipulating BI’s independence in monetary policy making, which it was granted in the wake of the Asian financial crisis to help ensure the country had a prudent central bank. Instead, the draft revision requires the formation of a “monetary council” that will help the government and BI with planning and determining monetary policy.
The council members will be the finance minister, who will also be the leader, another economic minister, the Financial Services Authority (OJK) chairperson and the BI governor and senior deputy governor.
“The monetary council will lead, coordinate and direct monetary policies to be in line with the government’s economic policies,” the bill reads. “The government may add other ministers as advisers to the monetary council.”
According to the 1999 and 2004 BI laws, other parties including the government may not intervene in BI’s tasks to manage the stability of the rupiah through inflation and exchange rate measures, obliging the central bank to oppose any intervention in its policy making and operations.
The bill also stipulates that banking supervision functions are to be returned to BI from the OJK by the end of 2023. The provision comes after reports emerged that President Joko “Jokowi” Widodo had expressed dissatisfaction in the OJK’s performance during the pandemic.
