BI to be audited in drive toward transparency
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)