Indonesian central bank’s mandate to include economic growth, jobs

Jakarta, Indonesia. Photo by Afif Kusuma on Unsplash

The Indonesian central bank’s mandate is being expanded to include economic growth and employment, according to a bill awaiting parliamentary debate, which also includes proposals to overhaul banking supervision.

The draft, reviewed by Reuters, is separate to a plan by parliament’s legislative committee (Baleg) to revise the 1999 Bank Indonesia (BI) Act, a move that analysts worry could undermine BI’s independence and potentially prolong the pandemic-led debt monetisation.

The new bill, drafted by the government and parliament’s financial committee, calls for pursuing sustainable economic growth and employment to be added to BI’s tasks, on top of its current mandate of price stability, according to a copy of the bill and academic papers backing the bill.

It also proposes to permanently allow BI to purchase government bonds in the primary market to prevent or in the event of a financial crisis, something that the central bank is currently only allowed to do in response to the coronavirus pandemic.

Other measures BI is given authority of under the new crisis protocols include regulating foreign exchange repatriation and conversion for Indonesian residents and lending to private companies through repurchase of their government bonds via commercial banks.

The bill also proposes that BI “must consider the government’s general economic policy” when deciding monetary measures.

On banking supervision, the bill sets up a new forum between regulators such as BI and the Financial Services Authority to allow for joint monitoring and details steps to take when a bank fails.

BI’s spokesman did not respond to request for comment and a finance ministry spokeswoman declined to comment.

Baleg, which sets parliament’s legislative agenda, will decide whether to prioritise the new proposals over its own revision to BI laws in coming days, deputy chairman Achmad Baidowi told Reuters.

In September, BI Governor Perry Warjiyo said in a parliamentary hearing he had been consulted by the government about a planned bill seeking to widen BI’s mandate. He said in reality BI has already taken into account economic performance when reviewing policy.

BI has this year cut interest rates a total of 125 basis points, pumped some $48 billion into the financial system and relaxed lending rules to lift Southeast Asia’s largest economy out of its first recession in more than two decades.

Reuters

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.