(Recasts with the governor’s comments on institutional reforms)
JAKARTA, Sept 28 (Reuters) - Indonesia’s central bank governor on Monday urged parliament to put regulatory reform off until next year while the country deals with the impact of the COVID-19 pandemic.
Bank Indonesia (BI) Governor Perry Warjiyo spoke at a parliamentary hearing, saying he has been asked to weigh in on a government plan to strengthen the financial sector, including by giving the bank a new mandate on supporting economic growth.
Parliament’s legislation committee is separately drafting a revision to the Central Bank Act to overhaul BI’s operations, a move analysts say could undermine the central bank’s independence and prolong pandemic-triggered debt monetisation.
“We’re in a difficult economic condition. Why don’t we focus on tackling the current condition (and) preventing the recession from spreading,” Warjiyo said.
“This doesn’t mean the current institutional setting does not need to be strengthened, but maybe next year is a better year to do some rearrangements,” he said.
Strengthening the financial regulatory structure required looking at multiple regulators and not just BI, Warjiyo said.
Also, if supporting economic growth is added to BI’s mandate, then “in practice we have already done that,” he said.
He said the central bank’s independence must be maintained to preserve investor confidence in Indonesia.
Southeast Asia’s largest economy is set to enter a recession this year due to the pandemic, its first since the Asian financial crisis of 1997-1998.
BI has resorted to unconventional policies to weather the pandemic’s fallout, such as pledging to purchase nearly 400 trillion rupiah ($27 billion) of government bonds while relinquishing interest payments, and cutting interest rates four times.
Warjiyo said if BI does not meet its targeted bond purchase this year due to the government underspending on its health and social budget, the plan could be carried over to next year.
BI has bought 183.48 trillion rupiah in bonds under the scheme so far. Warjiyo said BI’s balance sheet may see a 21 trillion rupiah deficit in 2021 due to the so-called “burden-sharing” scheme.
$1 = 14,850 rupiah Reporting by Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Kim Coghill and Tom Hogue
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