Key facts
- Indonesia's central bank will prepare technical regulations reflecting its wider mandate.
- A new financial system law expands the central bank's role to include supporting 'real sector growth' and 'job creation'.
- Parliament passed the new law on Thursday.
- Analysts are concerned about parliament's new powers to evaluate and give binding recommendations to financial institutions, including the central bank.
- Concerns exist about potential interference in the central bank's operations to ensure compliance with President Prabowo Subianto's growth agenda.
Following the passage of a new financial system law, Indonesia's central bank, Bank Indonesia, will prepare technical regulations to align with its expanded mandate. The new law, passed by parliament on Thursday, officially adds 'real sector growth' and 'job creation' to the central bank's objectives, alongside its existing roles of maintaining price and exchange rate stability and pursuing sustainable economic growth. Bank Indonesia supported the law and provided feedback during its deliberation. Analysts have expressed concerns regarding parliament's enhanced powers to evaluate and issue binding recommendations to financial institutions, including the central bank, and changes to the mechanism for removing members of BI's board of governors. These developments have fueled investor worries about potential interference in the central bank's operations to support President Prabowo Subianto's ambitious 8% GDP growth target by 2029. The central bank stated it will continue to set its policy mix to support national economic stability and sustainable growth, working with the government and parliament to meet its objectives.