Indonesia's Central Bank Powers
Indonesia expands central bank's role to boost growth, raising political interference concerns.
Indonesia's parliament passed a bill on June 4, 2026, that expands the central bank's mandate beyond inflation control to include economic growth and job creation. The same day, the rupiah hit a historic low of 18,047 per U.S. dollar, according to Malay Mail.
The bill, backed by a parliament 80% controlled by President Prabowo Subianto's coalition, also lets lawmakers make binding recommendations to Bank Indonesia and other independent financial regulators. Critics warn the move hands politicians direct leverage over monetary policy.
Parliament Rewrites Bank Indonesia's Core Mission
The House of Representatives passed the amendment to Indonesia's 2023 Financial Sector Law by acclamation in a plenary session, according to VOI.id. Finance Minister Purbaya Yudhi Sadewa defended the shift, saying the central bank must do more than target inflation. "It's not just about exchange rate stability or inflation," he said. "It's also about paying attention to economic growth and creating jobs," AFP reported.
The bill also creates a new mechanism to remove Bank Indonesia board members based on "performance." Previously, removal required proof of criminal conduct. Critics say this gives the president and parliament a powerful tool to oust officials who resist the 8% growth target Prabowo set when he took office in October 2024.
Political Ties at the Bank Fuel Conflict-of-Interest Fears
Concerns about political interference grew in January 2026, when parliament approved Thomas Djiwandono as Deputy Governor of Bank Indonesia. Djiwandono is the president's nephew and a former Deputy Finance Minister, according to Tempo. His appointment raised alarms about the merging of fiscal and monetary power under one political family.
In May 2026, lawmakers from two parties publicly called on Bank Indonesia Governor Perry Warjiyo to resign as the rupiah fell past 17,600 per dollar, Tempo reported. The new removal mechanism means those calls could now carry real legal weight.
Markets Were Already Losing Confidence Before the Vote
Moody's cut Indonesia's credit outlook to Negative in February 2026, citing "reduced predictability in policymaking" and "weakening governance." Fitch followed in March, warning of "increasing policy uncertainty." The Jakarta stock market has lost roughly one-third of its value so far in 2026, according to BowerGroupAsia.
"The market needs certainty that monetary policy remains independent and free from political intervention," said David Sumual, Chief Economist at Central Bank Asia, according to Malay Mail. With both Moody's and Fitch holding negative outlooks, another downgrade to near-junk status remains a real risk if the bank is seen as bending to political pressure.
Prabowo's Growth Push Collides With Economic Reality
President Prabowo has staked his presidency on hitting 8% GDP growth — a target no major economy has sustained in decades. In April 2026, Finance Minister Purbaya rejected a $35 billion IMF credit facility, claiming Indonesia had enough buffers. He also dismissed World Bank growth downgrades as a "calculation error," according to Reuters.
Indonesia's fiscal deficit is projected at 2.9% of GDP for 2026, nearing the 3% legal ceiling, according to Fitch. The new law also gives parliament oversight of the Danantara sovereign wealth fund and crypto asset regulation. The full text of the bill had not been made public by the time it passed, fueling further concern among investors and analysts.
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