Indonesian President Susilo Bambang Yudhoyono is considering candidates to replace central bank Governor Darmin Nasution when his term expires in May.
The president can submit the names of as many as three candidates to Parliament and must do so by Feb. 22, Harry Azhar Azis, deputy chairman of a parliamentary commission that oversees financial affairs, told reporters today. Nasution, 64, assumed the post in September 2010 after more than a year as acting governor, and can be re-nominated for the role.
The next Bank Indonesia governor inherits a central bank that is contending with a weakening currency, a widening current account deficit and inflation stemming from power tariff increases and higher wages. At the same time, the economy is slowing, adding pressure on policy makers to add stimulus to boost growth after keeping interest rates unchanged for a year.
“The challenges for Bank Indonesia over the next five years aren’t easy,” said Anton Gunawan, chief economist at PT Bank Danamon Indonesia. “Looking at global conditions, there’ll be a reversal of interest rates, and Bank Indonesia will need people who can anticipate and minimize these problems for the economy through monetary policy so it won’t be shocked and have an impact on financial stability.”
Nasution, who has a doctorate in economics from University of Paris, Sorbonne, France, 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.
Any nominee for Bank Indonesia’s top position needs to pass a so-called fit and proper test by the parliament’s finance committee, then be approved by lawmakers in a plenary meeting. Firmanzah, a senior staff member for economic affairs at the president’s office, declined to say yesterday if Nasution’s name will be re-submitted.
“We hope the position of Bank Indonesia governor will be decided before Nasution’s term ends, to guard the sustainability of BI’s policy on maintaining macroeconomics through monetary policy,” central bank spokesman Difi Johansyah said by phone yesterday.
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 ($104,000) 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.
Two candidates from within Bank Indonesia have been shortlisted for the post of deputy governor to replace Mulya, and will undergo required tests on March 11, Azis said today. They are Perry Warjiyo, executive director for economic research and monetary policy, and Hendar, executive director for monetary policy, he said.
The central bank this week 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 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.