JAKARTA, July 27 — Indonesia's central bank governor Perry Warjiyo stepped down today in a surprise move that analysts said could unsettle investors concerned about the central bank's independence and the country's fiscal management.
President Prabowo Subianto has accepted Warjiyo's resignation, State Secretariat Minister Prasetyo Hadi told reporters at an early morning press conference, ahead of the opening of financial markets in Jakarta.
Senior deputy governor Destry Damayanti has been appointed interim governor. She said Warjiyo informed the government on Saturday that he was stepping down for personal reasons.
The rupiah weakened by as much as 0.32 per cent to 17,992 against the US dollar following the announcement, while the benchmark stock index JKSE swung between gains and losses in choppy trading.
Prasetyo said Warjiyo submitted his resignation in a letter to the president but declined to elaborate on his personal reasons. Warjiyo could not be reached for comment.
"What must now be anticipated after Perry's resignation is the weakening of Bank Indonesia's independence," said Bhima Yudhistira Adhinegara, executive director of the Center of Economic and Law Studies.
"Restoring investor confidence will certainly not be easy, especially since the direction of monetary policy is under executive control. As long as the political pressure on BI continues, Perry's internal replacement will not last long."
Bank Indonesia's role and independence
Warjiyo was first appointed governor in 2018 and was reappointed for a second five-year term in 2023.
"A lot will depend on who takes over, with Destry, a senior deputy governor, stepping in initially. If Prabowo's nephew, Thomas Djiwandono, a deputy governor, steps in, the market will regard this with suspicion, given this is a crucial technocratic post and BI should remain independent," said Angus Mackintosh, an ASEAN specialist at Aletheia Capital in Singapore.
The appointment of a new governor requires both presidential nomination and parliamentary approval. The president will submit a nominee to parliament for a fit-and-proper test before lawmakers decide whether to approve the appointment.
"The president has not yet proposed a nominee," Prasetyo said.
Bank Indonesia has been under pressure to support Prabowo's ambitious growth agenda, while the rupiah fell to a historic low in June amid global market turmoil and concerns over Indonesia's fiscal management and the central bank's independence.
Last month, parliament passed sweeping legislation that further expanded Bank Indonesia's role in supporting economic growth while empowering lawmakers to issue binding recommendations to independent financial regulators and the central bank.
Bank Indonesia "will always ensure the continuity of its duties and authorities" to maintain the stability of the rupiah and the financial system while supporting an environment conducive to economic growth, Destry told reporters after the resignation was announced.
She said the central bank would continue operating in line with international best practices.
Ratings agencies Moody's and Fitch cited concerns over changes to Bank Indonesia's mandate among the key reasons for revising their outlooks on Indonesia's sovereign credit rating to negative earlier this year.
However, rival ratings agency S&P this month maintained a stable outlook, saying Bank Indonesia had enjoyed a level of operational independence since July 2005 broadly comparable with its regional peers and that its evolving mandate was not expected to significantly undermine that independence.
All three agencies rate Indonesia's sovereign debt at the second-lowest investment grade.
Bank Indonesia surprised markets last week by leaving interest rates unchanged while introducing new incentives to attract foreign capital inflows in support of the rupiah. Since May, the central bank has raised rates by a total of 100 basis points to shore up the currency.
Last year, the abrupt departure of Indonesia's influential finance minister Sri Mulyani Indrawati rattled markets, with investors fearing the country's fiscal credibility could be be eroded by Prabowo's costly spending plans.
