Monetary Constitution: Checks and Balances from Within

The core of the idea of monetary constitutionalism is to create a "self-enforcing monetary constitution". What does that mean? Instead of being strictly supervised by political (external) institutions, the monetary system—consisting of BI, OJK, and LPS—is expected to build internal restriction and supervision mechanisms. The principle is simple:
  • Not regulate money by power.
  • But regulate money by money.
This means that BI, OJK, and LPS have the autonomy to create their own rules of the game (such as Bank Indonesia Regulations/PBI, OJK Regulations/POJK, and LPS Regulations/PLPS) and mutual control mechanisms among them. The aim is to maintain the independence of the monetary system from short-term political interests, while preventing this system from growing too expansive and harming other sectors or the rights of citizens.

Implementation in the Indonesian Context

This idea is very relevant to the development of Indonesian constitutional law.
  1. Strong Constitutional Basis: The 1945 Constitution, especially after the amendments, has laid a solid foundation. Article 23D explicitly guarantees the independence of the central bank. This arrangement was born from the bitter experience of the 1998 monetary crisis, where political intervention in the central bank proved destructive.
  2. Monetary Institution Trio: The presence of OJK and LPS alongside BI is no coincidence. This is a reflection of global needs and international best practices to create functional specialization (macroprudential, microprudential, and deposit insurance). The Constitutional Court has even confirmed the status of OJK and LPS as institutions of constitutional importance, meaning their role is vital even though it is not explicitly mentioned in the 1945 Constitution.
  3. Internal Mechanism: The formation of the Financial System Stability Committee (KSSK) consisting of the Minister of Finance, Governor of BI, Chairman of the OJK Board of Commissioners, and Chairman of the LPS Board of Commissioners is a real manifestation of the internal checks and balances mechanism. This is where the process of self-control and coordination between monetary institutions is expected to occur to prevent a crisis.
  4. Remain Open to External Impulses: Independence does not mean total isolation. These institutions must remain sensitive to "external impulses". This can take the form of criticism from civil society, NGO advocacy, to recommendations from international institutions such as the IMF, World Bank, and global standards such as the Basel Core Principles and IADI Core Principles. These impulses do not directly intervene, but provide important input for the internal self-regulation process.