| President Suharto | ||||||
Few in the financial sector would doubt the benefits of having an independent central bank, where governors are free from interference or threats and responsible for targeting inflation, controlling money supply and interest rates and supervising the sector, without needing to heed advice from political masters.
But what happens if the governor of the bank is suspected of financial fraud and is placed under house arrest pending trial? Or if the central bank is found to be missing $15 billion due to improper disbursement and faces liquidation? Or if the local parliament, the only body which can rewrite the law to replace the governor, refuses to go along with presidential pleas to do so? Such is the situation in Indonesia.
The imbroglio dates from 1997, when the central bank, under a different governor, disbursed at the behest of a committee of economists and ministers led by disgraced former President Suharto, a total of Rp134 trillion ($14.2