Indonesia's Parliament Approves Darmin Nasution as Central Bank Governor

Indonesian lawmakers approved a proposal that Bank Indonesia Acting Governor Darmin Nasution take the job permanently, ending a 14-month impasse over the central bank’s leadership.

The 54 lawmakers representing Commission XI, the body charged with considering Darmin’s nomination, agreed by consensus late yesterday to approve him following two days of questioning.

President Susilo Bambang Yudhoyono nominated Nasution, 61, to be central bank chief in June, seeking to plug a gap in the country’s economic leadership after the previous governor, Boediono, resigned in May 2009 to become Yudhoyono’s running mate in last year’s presidential election. Indonesia has left its benchmark interest rate at a record low of 6.5 percent since August 2009.

“The approval is expected to increase market confidence after the post was left vacant for more than a year,” said Juniman, an economist at PT Bank Internasional Indonesia in Jakarta. “The market wants to know what monetary policies will be taken by the central bank.”

Yesterday’s approval will be formalized at a plenary meeting. Nasution will be the 14th governor in the central bank’s 57-year history.

Rate Decisions

Indonesia has held back from tightening monetary policy even as neighbors from Malaysia to India raised borrowing costs this year to avert asset bubbles and contain inflation in a region that’s leading the global economic recovery. The country’s benchmark interest rate is at the lowest level since it was introduced in July 2005.

Southeast Asia’s largest economy expanded 5.7 percent in the first quarter from a year earlier, the fastest pace since 2008. Consumer prices, which rose 5.05 percent in June, are forecast to climb in a range of 5.8 percent to 6 percent this year, Bank Indonesia Deputy Governor Hartadi Sarwono said on July 20.

Standard & Poor’s raised Indonesia’s sovereign credit rating to a 12-year high of BB from BB- on March 12, with a positive outlook. S&P and Moody’s Investors Service both rank Indonesia two levels below investment grade, while Fitch Ratings on Jan. 25 raised it to one step below investment.

Nasution received his doctorate in economics from University of Paris, Sorbonne, France in 1986, according to the Bank Indonesia website. He was chairman of Indonesia’s Capital Market and Financial Institution Supervisory Agency, or Bapepam, in 2006, and was director general of taxation at the Ministry of Finance before moving to the central bank.

Bank Indonesia is led by a board of governors consisting of one governor, one senior deputy governor and six deputy governors.

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

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