ASEAN Beat | Economy | Southeast Asia

Resignation of Bank Indonesia Governor Shocks Markets, Raises Independence Questions

Perry Warjiyo, who has served as governor of the central bank since 2018, said that he was stepping down for “personal reasons.”

Bank Indonesia Governor Perry Warjiyo (right) and Indonesian Finance Minister Sri Mulyani Indrawati speak during a G20 press briefing during the 2022 Annual Meetings at the International Monetary Fund in Washington, D.C., Oct. 13, 2022.

The governor of Bank Indonesia (BI) stepped down from his post yesterday, sending a tremor through markets and prompting fresh concerns about political interference in economic policymaking.

During a press conference, State Secretariat Minister Prasetyo Hadi announced Perry Warjiyo’s resignation, which comes two years before the expiry of his current term as BI governor.

“As of yesterday, we officially received a letter of resignation from the Governor of BI to the President,” Prasetyo said during the press conference, accompanied by members of the BI Board of Governors, the state news agency Antara reported.

“The president accepted Perry Warjiyo’s resignation and conveyed his utmost gratitude for his dedication in leading Bank Indonesia for seven years,” he added.

Perry began his career at BI in 1984, and has served as governor since 2018. He cited only “personal reasons” for stepping down and did not meet President Prabowo Subianto directly before submitting his resignation, Prasetyo said.

He added that Senior Deputy Governor Destry Damayanti, a former chief economist at Bank Mandiri, would serve as acting governor until a replacement governor is elected. This candidate would be chosen from a list of three candidates proposed by Prabowo, which would be forward to parliament for a “fit and proper test.” Legislators would then select one of the candidates.

Perry’s departure comes at a difficult time for the Indonesian economy. The country’s currency fell to record lows this year, passing the psychological threshold of 18,000 rupiah to the U.S. dollar in June. It is now trading at a lower level than at any time since the Asian Financial Crisis of 1997-1998.

The unexpected resignation set off a minor tremor in Indonesian markets. The Jakarta Stock Exchange Composite Index fell 0.5 per cent, and the rupiah slumped from around 17,935 to the U.S. dollar to 18,009 by the close of trading yesterday.

The bigger issue is how Perry’s resignation might compound investors’ growing skepticism about the Prabowo administration’s economic stewardship.

BI has been under pressure to support Prabowo’s economic policy, which aims to achieve an annual GDP growth of 8 percent per year for the rest of his term. This has included high-spending populist policies, including a multibillion-dollar free meal program, which have widened the fiscal deficit and pushed it toward its legally mandated........

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