Key facts
- Indonesia's parliament passed legislation expanding Bank Indonesia's role to support economic growth.
- Lawmakers will have the power to evaluate independent financial regulators and the central bank.
- The bill aims to create an economic environment conducive to real sector growth and job creation.
- The legislation passed with support from all parties in parliament.
- Concerns exist about potential political interference in the central bank.
- Moody's and Fitch have revised Indonesia's credit rating outlook to negative.
Indonesia's parliament has passed a significant bill that broadens the mandate of Bank Indonesia (BI) to place greater emphasis on supporting economic growth, alongside its existing responsibilities for price and foreign exchange rate stability. The legislation, which passed by acclamation with support from all parties, also grants lawmakers the authority to evaluate independent financial regulators and the central bank. President Prabowo Subianto is determined to pursue a high-growth agenda, aiming for 8% economic expansion during his term. Finance Minister Purbaya Yudhi Sadewa stated that existing legislation would be expanded to require BI to implement policies conducive to real sector growth and job creation. The bill's passage was largely a formality given President Prabowo's coalition controls over 80% of parliament. This development occurs as investors express concerns about potential political interference in the central bank, which has contributed to a cooling of investment in Indonesia. Both Moody's and Fitch have recently revised their credit rating outlooks for Indonesia to negative from stable, citing reduced policymaking credibility and predictability. The Indonesian rupiah has depreciated by over 7% against the U.S. dollar year-to-date, reaching a historic low, and the stock market has experienced a significant decline.