Economists: Burden sharing might bump up inflation rate
JAKARTA. Director of the Centre of Economic and Law Studies (Celios), Bhina Yudhistira, deems Financial Sector Development and Reinforcement (lit. Pengembangan dan Penguatan Sektor Keuangan/P2SK) Bill quite hazardous due to the burden sharing issue that allows Bank Indonesia to keep printing money.
“This burden sharing is highly dangerous. First of all, this burden sharing can potentially increase the inflation rate, as Bank Indonesia (BI) will print more money to pay off Government Securities, and thus increasing the currency in circulation,” Yudhistira said, as quoted by Tempo.
On the other hand, this burden sharing issue is said to diminish BI’s independence as the central bank of Indonesia. “Because it seems that BI will be under the command of the Ministry of Finance, considering its obligation to pay off Government Securities,” Yudhistira further explained.
It does not stop there. Yudhistira also highlighted the fiscal discipline of Bank Indonesia due to this burden sharing. He is concerned about the possibility of funds being allocated to sectors that are irrelevant to safeguarding the stability of domestic financial system.
“Here is where the critical point lies. Do not let there be any moral hazard,” Yudhistira concluded. (KR/ZH)