Jakarta. Economists have flagged independence risks on Bank Indonesia’s sudden shake-up, as the country awaits the person who will officially helm the financial institution that has been under scrutiny over the free-falling rupiah.

The central bank’s governor Perry Warjiyo had officially stepped down from his post over undisclosed personal reasons, the government announced Monday morning.

President Prabowo Subianto is set to nominate Perry’s successor soon, with the candidate being subject to lawmakers’ approval. Bank Indonesia senior deputy governor Destry Damayanti is now the interim chief.

Bhima Yudhistira of the economic think-tank Celios suspects that Perry has succumbed to “political pressure”, while doubting the next boss will be able to hold on to the job for long. According to Bhima, BI has been facing the brunt of the blame, be it the ballooning deficit or even problems plaguing Prabowo’s cost-heavy flagship program of feeding schoolkids nationwide.

“But the one that gets the blame has always been Bank Indonesia for having failed to maintain rupiah stability and investors’ confidence. Fiscal authority intervention in the monetary sector is already too much. It is no longer a synergy,” Bhima told the Jakarta Globe.

“Restoring investors’ confidence is not easy, especially now that monetary policies are under executive control.” 

Kiwoom Sekuritas’ research head Liza Camelia Suryanata warned that market worries could worsen if Thomas Djiwandono — the central bank’s deputy governor and Prabowo’s nephew — carries the torch. Legally, Thomas could assume the role if he gets nominated by Prabowo and secures parliamentary approval, despite having only been in the central bank for less than 6 months.

“Legality does not automatically create credibility,” Liza said. 

“Thomas’s family relationship with the president, his very limited experience as a central banker, and the possibility that he could leapfrog [Destri] may create the perception that the relationship between the government and Bank Indonesia is shifting from policy coordination towards political control.”

To the Globe, public policy analyst Achmad Nur Hidayat wrote that the latest leadership shake-up had put the central bank’s independence “at stake”. He urged Bank Indonesia to avoid making decisions — be it on interest rates or rupiah stability — based on “short-term political needs”.

“If they appoint [Perry’s successor] based on his willingness to comply with the government’s fiscal needs, Indonesia is bound to enter a state of fiscal dominance,” Achmad said.

“When this happens, monetary policy is no longer primarily directed at maintaining price and rupiah stability, but instead goes into easing the burden on the state budget,” he added.

Josua Pardede, the chief economist at PermataBank, sees that this has been an “orderly” transition. The resignation is expected to have little impact as “Bank Indonesia’s decisions do not fundamentally rest on a single individual”.

Josua also views Destry as a market-friendly figure, citing her experience. She has been a senior deputy governor since 2019, and was once a commissioner to the deposit insurance agency LPS. 

“Her track record demonstrates a strong understanding of market behavior, capital movements, banking, securities, and how to form investors' expectations,” Josua explained.