Perdana Wahyu Santosa, Professor of Economics, Dean of the Faculty of Economics and Business at Universitas YARSI, Research Director of GREAT Institute, and CEO of SAN Scientific, in his opinion piece “Fiscal Prioritization?”, raises a legitimate concern: signals from the IMF press statement (regarding rigorous oversight of quasi-fiscal operations) are interpreted as an alarm that Indonesia’s fiscal–monetary relationship is shifting—from healthy coordination to “fiscal dominance.” The main concern is that when financing needs, political projects, and industrialization agendas pressure the central bank, monetary independence weakens, and policy becomes an extension of the ruling coalition’s agenda.
I agree with the underlying problem, but not with the reflex that often accompanies it: as if the automatic solution is to return to the dogma of a “sterile central bank and restrained fiscal policy”—a neatly packaged textbook version that often ignores the realities of developing countries that require large public investment, have shallow financial markets, and are frequently hit by global shocks. The challenge is not choosing between “fiscal or monetary,” but distinguishing legitimate coordination from dangerous dominance—and building the institutional safeguards around it.
From Coordination to Dominance
In times of crisis, fiscal–monetary coordination is normal, even necessary. The pandemic is an example: liquidity stabilization, bond purchases, emergency financing schemes—all of these fall into the quasi-fiscal domain: monetary policies whose effects resemble fiscal policy because they bear risk, share costs, or pick sectoral winners. The problem arises when “emergency” becomes routine. Fiscal dominance is not simply “active government,” but a condition in which the central bank loses the ability to say no because fiscal targets (deficit levels, interest costs, projects) become the primary determinant of monetary direction. The symptoms typically include:
• Temporary instruments become permanent. Crisis-response schemes lack a clear sunset clause, are not evaluated, and turn into “normal policy tools.”
• Costs are obscured. Losses/risks are recorded on the central bank’s balance sheet or other institutions rather than transparently in the state budget (APBN). The public ends up “paying” through inflation, credit distortions, or weakened fiscal discipline—without proper budget debate.
• Policy objectives become blurred. Price stability, financial system stability, and growth agendas are mixed without a clear hierarchy. When everything becomes a goal, accountability drops to zero.
At this point, the argument of the opinion piece becomes sharp: fiscal–monetary relations are not merely technical debates; they are political-economic debates about who sets priorities and who bears the risks. If industrialization, downstreaming, or “economic nationalism” projects are carried out through non-transparent financing channels, we risk producing a new form of “crony capitalism”—where public policy becomes a hidden subsidy for a small network of interests. But there is also a trap: assuming central bank independence is an automatic guarantee. A central bank can be independent on paper yet still be vulnerable to being “pulled” through leadership appointments, narrative pressure, and expanded mandates. The issue is not the slogan of “independence,” but credible mechanisms of resistance: rules, risk limits, and political processes that make covert financing of policy impossible.
Oversight by Whom, for Whom?
The IMF seemingly calls for rigorous oversight of quasi-fiscal operations. Technically, this makes sense because activities with fiscal effects must be tightly monitored. However, the subtle critique here is that the IMF tends to favor “oversight” and “stability” language as universal solutions, but often overlooks the politics of oversight itself.
If oversight merely means “compliance with indicators” (controlled inflation, safe deficits, strong balance sheets), we may fall into two problems:
- Oversight becomes a performance of compliance. Reports look neat, but decision-making remains closed and driven by power relations.
- Stability becomes a fetish, while structural problems (narrow tax base, unproductive spending, inequality, industrial capacity) remain untouched.
Therefore, “rigorous oversight” should be understood not as “the IMF supervising us,” but as strengthening domestic accountability: Parliament, the audit board, supervisory institutions, and the public must also be able to see—clearly—how much policies cost, who benefits, what the worst risks are, and when the policies end.
There are several institutional prescriptions that are quite concrete and do not require drama:
• An official definition and public list of quasi-fiscal activities (what they are, through which instruments, and their values).
• A “traffic-light risk rule”: exposure limits, loss limits, and automatic termination conditions (sunset clauses).
• Integrated fiscal risk reporting: all implicit risks (including guarantees, hidden interest subsidies, or off-budget financing schemes) must be included in a fiscal risk statement discussed publicly.
• Hierarchical coordination: clear decision-making authority, with non-conflicting objectives (price stability is not “optional”).
In this way, we are not rejecting IMF input—but attempting to “ground” it in democratic governance and Indonesia’s political-economic context. The IMF can be a mirror, but it should not replace our own economic and political common sense.
Saving Coordination, Preventing Dominance
The opinion “Fiscal Prioritization?” is correct in reminding us that shifts in fiscal–monetary relations are shifts in power, not merely shifts in economic instruments. However, the most useful response is not a return to monetary purism, but the construction of safeguards: cost transparency, risk limits, sunset clauses, and stronger public oversight.
This is where Indonesia can have policies flexible enough for crisis response and transformation, without turning the central bank into a mere political financing machine. The world is indeed messy; precisely for that reason, the rules must be clearer and more structured—not more ambiguous.
