(June 4): Indonesia has expanded the central bank’s objectives to include real sector growth, and granted parliament the power to evaluate the monetary authority’s performance.
The changes come at a time when financial markets are poring over Indonesia’s policy credibility, which has sent the rupiah tumbling to new record lows and foreign funds selling off.
The parliament passed revisions to a sweeping financial-sector law on Thursday, that include strengthening “Bank Indonesia’s objectives in implementing policies and policy mixes that are conducive to the real sector, as well as improving Bank Indonesia’s budget governance and accountability”, legislator Mohamad Hekal said during the parliament’s plenary session.
The revised law also grants parliament the power to conduct performance evaluations of Bank Indonesia (BI), the Financial Services Authority and the Deposit Insurance Agency. Results and recommendations by lawmakers will be submitted to the government for follow-up.
A copy of the law has not been made public and officials did not give further details. There was also no mention of whether the latest version of the law adds job creation to BI’s mandate, as earlier signalled by lawmakers and Finance Minister Purbaya Yudhi Sadewa.
The central bank has now been given an ever-growing list of objectives, with the government adding economic growth to its mandate in 2022. That comes at a time when Bank Indonesia is already struggling with its primary responsibility of stabilising the rupiah, which just breached the key level of 18,000 per dollar on Thursday.
See also: Philippines sees another rate hike to curb war-driven inflation
The rupiah held its earlier loss of 0.5% in morning trading, while stocks and bonds declined. Global funds have already offloaded US$3.3 billion ($4.23 billion) worth of local stocks and another US$653 million worth of bonds this year.
The revised financial-sector law also includes provisions regarding the establishment of an exchange for strategic minerals and commodities, the issuance of debt securities by the Danantara sovereign wealth fund, and the establishment of the Indonesian International Financial Center.
Uploaded by Chng Shear Lane
