Bloomberg News

Yudhoyono Taps Finance Minister to Lead Indonesia Central Bank

February 22, 2013

Indonesian President Susilo Bambang Yudhoyono nominated Finance Minister Agus Martowardojo to replace Darmin Nasution as central bank governor, Speaker of the House of Parliament Marzuki Alie said.

Yudhoyono proposed Martowardojo as the only candidate in a letter to parliament late yesterday, Alie said by phone today.

The president’s choice heralds a change in leadership at a central bank grappling with a weakening currency, a widening current-account deficit and inflation stemming from power tariff increases and higher wages. At the same time, economic growth has slowed, adding pressure on policy makers to boost expansion after keeping interest rates unchanged for a year.

“Monetary policy management must emphasize balancing the policy rate with growth-inflation dynamics,” said Enrico Tanuwidjaja, a Singapore-based economist at Royal Bank of Scotland Group Plc.

The legislative body’s finance committee will hold a fit and proper test on the candidate before he can be approved by lawmakers in a plenary meeting.

Nasution, 64, assumed the post in September 2010 after more than a year as acting governor. He has a doctorate in economics from University of Paris, Sorbonne, France, and is the 14th governor in the central bank’s six-decade history. He became acting governor after Vice President Boediono resigned in May 2009 to become Yudhoyono’s running mate in the last presidential election.

Tenure

During Nasution’s tenure, one of his deputy governors was the target of probes into a 2008 bailout of PT Bank Century. Budi Mulya was under investigation by the state auditor regarding a “personal” 1 billion rupiah ($103,000) loan he obtained from the former owner of Bank Century. The deputy governor was relieved of his role as head of monetary policy operations and his term ended last year.

The central bank this month kept its reference rate unchanged for a 12th meeting at a record-low 5.75 percent. The central bank has stepped up intervention to support the rupiah and narrow the gap between local and overseas prices, Hendar, executive director for monetary policy at the central bank, said in a Jan. 28 interview.

Bank Indonesia may take action on its benchmark rate if the currency’s depreciation causes inflation to accelerate, Deputy Governor Hartadi Sarwono said last month. The economy expanded 6.11 percent last quarter, the slowest pace in more than two years.

”Leadership and continuity are important for BI,” said President Director Bank Danamon Indonesia Henry Ho in Jakarta last week. ” So far, the central bank has done a very good job, working with the banks, working with many issues in the economy. We want to see Indonesia continue to grow.”

To contact the reporter on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang2@bloomberg.net


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