BI to be audited in drive toward transparency
JAKARTA (JP): The Supreme Audit Agency (BPK) will audit Bank Indonesia as part of its drive to boost transparency, according to a senior official at the central bank.
The official, who insisted on anonymity, said the audit plan would be stipulated in the government's new letter of intent (LoI) to the International Monetary Fund (IMF).
The official added that the audit plan was an integral part of the new central bank law that provides Bank Indonesia with independence to design monetary policy without government intervention.
"Under the law, Bank Indonesia will no longer be audited by the Development Finance Comptroller (BPKP) but by BPK," the source told the Jakarta Post.
"The audit will only be done if the House of Representatives orders it," he said.
The source, however, added that the audit concept was still awaiting approval of Bank Indonesia Governor Sjahril Sabirin.
The official said the new letter of intent would now be co- signed by Sjahril and Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.
"This is to make the new LoI binding to Bank Indonesia," the source explained.
Previously, only Ginandjar signed the letter of intent.
The source said the government was still fine-tuning the wording of the new letter of intent, which would be immediately sent to IMF headquarters in Washington for approval.
The approval of the new letter of intent will pave the way for the disbursement of more IMF bailout money for the country. The Fund is organizing more than US$46 billion in bailout funds to finance the country's economic reform programs.
Government officials and IMF Asia Pacific director Hubert Neiss have said that the new letter of intent also would contain an upward revision of the country's macroeconomic assumptions.
Neiss expected the central bank benchmark interest rate to drop to below 10 percent by the year's end, lower than Bank Indonesia's earlier projection of 12 percent.
The central bank official agreed that it was possible for the benchmark interest rate to fall to below the 10-percent level without hurting the exchange rate of the rupiah against the U.S. dollar because inflation was projected to continue to be low.
"We are still expecting deflation in July and August because prices are still going down," the source said.
He said the IMF expected inflation for the full calendar year to be below 6 percent, compared to an earlier government projection of between 10 percent and 13 percent.
"But Bank Indonesia's inflation estimate for 1999 is between 8 percent to 9 percent," the source said.
Indonesia suffered hyperinflation of more than 77 percent in 1998. But the country has enjoyed deflation since March this year.
The benchmark interest rate of Bank Indonesia's one-month promissory note (SBI) has gone down to 15.86 percent from more than 35 percent at the beginning of the year.
The lower interest rate is expected to encourage domestic banks, particularly those which have been recapitalized, to resume lending to the real sector.
Bank lending has been completely halted for more than a year after the benchmark interest rate soared to more than 70 percent last August.
However, analysts said that despite the lower interest rate environment bank lending would not immediately start until a resolution has been reached for the huge non-performing bank loans.(rei)