In a move raising eyebrows regarding the independence of Indonesia’s central bank, President Prabowo Subianto has nominated his nephew, Thomas Djiwandono, to join the Board of Governors of Bank Indonesia (BI). This decision comes as the government sets audacious economic targets, aiming for an average growth rate of eight per cent by 2029.
Investor Concerns Grow
The nomination has sent ripples through the financial markets, with investors expressing concerns that independent monetary policymaking might be compromised. Currently, the economy is growing at around five per cent, and the potential influence of family ties on the central bank’s operations has led to uncertainties.
- Djiwandono is currently a deputy finance minister.
- He will face a fit-and-proper test by parliament.
- His nomination follows the resignation of BI’s deputy governor Juda Agung.
The Role of the Central Bank
Members of the BI Board, which includes a governor and several deputy governors, have the power to decide key interest rates and policy directions. Traditionally, they comprise experienced central bankers, economists, or past executives of commercial banks—all appointed with parliamentary approval.
Official Stance on Independence
Despite the apprehensions, Finance Minister Purbaya Yudhi Sadewa emphasised that the swap of top officials would not undermine the bank’s independence. He expressed confidence that as understanding of Djiwandono’s qualifications grows, the market would stabilise and possibly strengthen the rupiah.
Market Implications
The financial community is closely watching these developments. Analysts predict that BI may keep interest rates unchanged in the upcoming review, focusing more on sustaining economic growth rather than aggressive rate hikes.
With policymakers debating a bill aimed at bolstering BI’s role in economic growth support, the coming weeks will be crucial in determining the central bank’s trajectory under its new potential leadership.