(Bloomberg) -- Indonesia is one step closer to requiring the central bank to come to the government’s aid through crisis bond-buying, while dropping earlier proposals to expand the monetary authority’s role.
A parliament commission has approved a draft of the financial sector omnibus law that retained a provision calling on Bank Indonesia to undertake debt monetization in times of crisis. An earlier version sought to add job creation and economic growth to BI’s current mission of maintaining rupiah stability.
The central bank’s mandate is to “achieve rupiah stability, maintain payment system stability, and participate in maintaining financial system stability in order to support sustainable economic growth,” according to the most recent version reviewed by Bloomberg on Thursday.
The bill was passed by parliament’s finance commission on Thursday and will be debated at a plenary session next week.
“Without financial sector reform, Indonesia will continue to depend on foreign capital for investment needs and economic activity,” said Finance Minister Sri Mulyani Indrawati at the hearing.
The proposed legislation, first introduced in 2020, would also amend dozens of “outdated” laws that govern the financial sector, including the capital market, banking, insurance and pension.
Jokowi, as the president is known, has long called for Bank Indonesia to take a more active role in boosting Southeast Asia’s largest economy. Indrawati has also sought to assure investors that the law would uphold the central bank’s independence as it’s fundamental to Indonesia’s credibility in the market.
--With assistance from Norman Harsono.
(Updates with parliament commission’s approval.)
©2022 Bloomberg L.P.
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