Indonesian Parliament Backs Bill To Expand Role Of Central Bank
Indonesia is set for a major shake-up of its financial governance framework after the country’s parliament financial commission and the government reached agreement on a reform bill that expands the mandate of the central bank to explicitly include support for economic growth and job creation.
The agreement was reached during a parliamentary hearing on Wednesday involving key government officials, including Finance Minister Purbaya Yudhi Sadewa. The proposed legislation still requires approval from the full parliament, but such endorsements are typically consistent with the recommendations of the financial commission.
At the centre of the reform is a strengthened role for Bank Indonesia, alongside broader changes affecting other key financial institutions, including the Financial Services Authority and the Indonesia Deposit Insurance Corporation. The bill also gives parliament increased oversight powers, allowing lawmakers to evaluate the performance of these institutions and issue recommendations that, according to officials, will now be binding.
Deputy head of the commission Mohamad Hekal said the reforms are designed to reinforce institutional accountability while modernising Indonesia’s financial system. He added that the package also includes structural changes such as plans to demutualise the Indonesia Stock Exchange, new rules governing sovereign debt instruments issued by the state-owned investment fund Danantara, and the establishment of a dedicated exchange for minerals and strategic commodities.
Finance Minister Sadewa said during the hearing that the expanded mandate for Bank Indonesia would require the central bank to adopt policies and policy mixes that support real sector expansion, job creation, and broader economic growth—signalling a shift toward a more growth-oriented monetary policy framework.
He also confirmed that parliamentary recommendations arising from regulatory evaluations would be binding, marking a significant increase in legislative influence over financial oversight institutions.
The full details of the proposed reforms were not publicly read out during the live broadcast of the hearing, leaving some aspects of the bill still unclear ahead of its parliamentary vote.
Lawmakers, however, emphasised the importance of maintaining institutional independence. Legislator Tommy Kurniawan warned that any expansion of Bank Indonesia’s mandate must be carefully balanced with its independence, which remains a cornerstone of monetary stability and investor confidence.
Bank Indonesia officials have indicated that the institution already considers economic growth in its policy deliberations. Last month, the central bank raised interest rates by 50 basis points in an effort to stabilise the rupiah, which has faced downward pressure in recent trading periods.
The proposed reforms come at a time when Indonesia is seeking to strengthen coordination between fiscal and monetary authorities while boosting investor confidence and supporting long-term economic transformation.
If passed by the full parliament, the bill would mark one of the most significant overhauls of Indonesia’s financial governance structure in recent years, reshaping the balance between regulatory independence, legislative oversight, and economic policy coordination.
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