UPDATE 1-Indonesia panel recommends overhaul in central bank's mandate

* Panel suggests GDP growth, employment added to mandate

* Recommends ministers should join new Monetary Board

* Bill at early stage and recommendations may not be followed - MP (Adds details, economist comments)

JAKARTA, Aug 31 (Reuters) - Indonesia’s central bank should have its mandate expanded to include economic growth and give ministers the right to vote at policy meetings, a panel advising parliament said, recommending the biggest shake-up of the monetary authority in two decades.

The panel of experts presented on Monday the proposed bill to parliament’s legislative body (Baleg), which will discuss it and prepare an academic paper after more consultation, said Baleg Deputy Chairman Achmad Baidowi.

Baidowi said the recommendations may not be in the final version of the bill, which would need parliamentary and government approval.

The panel recommended a new Monetary Board to include the finance minister, a minister in the economic sector, the central bank’s board of governors and the chairman of the Financial Services Authority (OJK).

At least one minister should attend monthly policy meetings and be given voting rights on a mandate that would be expanded to include supporting economic growth and job creation.

The existing mandate of BI, which is independent of the government, is to manage the value of the rupiah through inflation and the exchange rate.

Its six-member board of governors currently holds a monthly meeting to review monetary policy, including deciding on the level of its main interest rates.

Josua Pardede, an economist at Bank Permata in Jakarta, said allowing the government to vote “had the potential to disrupt BI’s independence”.

Satria Sambijantoro, an economist at Bahana Securities, said it was the right time for BI to “be more relevant towards government mandates, such as economic growth and employment,” noting the U.S. Federal Reserve’s recent landmark strategy shift.

The panel’s recommendations come after the government and BI held what sources said were tough talks to agree on a COVID-19 package that included BI pledging to buy $28 billion of government bonds while relinquishing interest payments.

The panel recommended BI be allowed to purchase government bonds in the primary market for monetary management and emergency fiscal financing, as well as buying interest-free government bonds or bonds with discounted price under certain economic conditions.

BI is currently allowed to do such operations only in response to the coronavirus pandemic, as based on President Joko Widodo’s emergency decree.

In addition, the panel also recommended BI take over banking supervision from OJK by Dec. 31, 2023.

The finance ministry declined to comment at this stage and since it had not had formal discussions with Baleg, a spokeswoman said. A central bank spokesman also declined to comment, while the coordinating ministry of economic affairs and OJK did not respond to a request for comment. (Reporting by Tabita Diela and Gayatri Suroyo Editing by Ed Davies)