Faisal Basri: The Government Is Frustrated Because Of The Pandemic, So It Will Let Go Of Control To Handle COVID-19

Indef's senior economist, Faisal Basri. (Photo: KKP)

JAKARTA - Senior Economist of the Institute for Development of Economics and Finance (Indef) Faisal Basri assessed that a study of financial system reform is not necessary in the midst of the COVID-19 pandemic. The plan to issue a government regulation in lieu of a law (Perppu) on financial system reform shows that the government is frustrated in dealing with the pandemic.

Faisal said that a study on financial system reform is not the most urgent matter. On the contrary, he considered, what is urgent now is the Perppu to handle COVID-19. This is because COVID-19 is a source of problems in the economy as a whole, including the financial system.

As is well known, discussions on the planned revision of Law (UU) number 23 of 1999 concerning Bank Indonesia (BI) are still ongoing at the Legislation Body (Baleg) of the House of Representatives (DPR).

"The problem is, according to my analysis, the government 's economic policy controller is a bit frustrated in managing the economy. Because they do not have the power to control the problem, namely COVID-19," he said, during an Indef discussion, Thursday, October 1.

According to Faisal, the government reasoned to revise the BI Law because of the lack of coordination in financial reform. Even though so far there have been ex officio members from the Ministry of Finance to facilitate coordination.

"OJK has an ex officio from the Minister of Finance and BI. I am surprised that there are problems with strengthening an integrated database, there are problems with checks and balances between institutions," he said.

According to Faisal, current banking liquidity tends to be stable, which is reflected in the Loan Deposit Ratio (LDR) as of August 2020, according to OJK data, which is at the level of 85.1 percent, much lower than the position in December 2019, which is 94.4 percent.

Meanwhile, banking CAR at 23.1 percent as of August 2020 slightly decreased slightly from December 2019 at 23.4 percent. But according to him, there is an obstacle in the banking industry, namely, bank's Third Party Funds (DPK) continue to experience an increase of 11.6 percent on an annual basis or year on year (yoy) as of August 2020, while credit growth only grows 1 percent on an annual basis. However, this problem should be overcome by OJK.

"They (the government) have all the instruments, but they don't have the instruments to deal with COVID-19, so they are looking for other instruments that do not yet exist, namely in the form of strengthening the government to take over all possible instruments, more quickly," he explained.