(Bloomberg) -- Indonesian lawmakers are resuming discussions on the financial sector reform bill that risks eroding the autonomy of its central bank.

Indonesia has sought to revamp its financial sector laws from 2020, before the talks stalled due to the pandemic and investor concern over the central bank’s independence. Parliament’s finance commission has since revived meetings to draft the so-called omnibus financial sector law since June, with economists and bankers invited to give their input last week.

Indonesia Draft Law Seeks to Limit Central Bank Autonomy

The latest draft includes adding economic growth and job creation to the central bank’s mandate, as well as providing a legal basis for Bank Indonesia to buy sovereign bonds in the primary market when needed during a financial crisis, according to a recent copy that includes proposals from parliamentary factions. 

Other proposed changes related to the central bank:

  • The central bank may reverse-repurchase debt papers from the Indonesia Deposit Insurance Corporation to address banking liquidity issues
  • Largest political faction Indonesian Democratic Party of Struggle, or PDIP, proposes letting Bank Indonesia’s board of governors extend their five-year terms by a maximum of two times, from one time currently
  • Second-largest party Golkar suggests including digital rupiah as an official currency issued by the central bank

©2022 Bloomberg L.P.