President Prabowo Subianto has submitted two names for Bank Indonesia\nleadership to the House of Representatives (DPR). Destry Damayanti has\nbeen proposed as Governor of Bank Indonesia (BI), and Aida S. Budiman as\nSenior Deputy Governor.<\/p>\n
Destry and Aida are not newcomers to the financial sector. Both have\nlong track records before each became part of Bank Indonesia\u2019s\nleadership. Now, the leadership baton at BI appears set to be held by\nthe two of them if the DPR approves.<\/p>\n
At a time when the world is full of turmoil, it is honestly not easy\nfor the two of them to lead BI going forward. However, both already have\ninitial capital: their long track records are an investment of trust\nfrom market participants. And this is not easily fulfilled.<\/p>\n
At least this was evident when Perry Warjiyo stepped down as BI\nGovernor; the market did not appear particularly volatile, because BI\u2019s\ninterim leadership was held by Destry and the current team.<\/p>\n
President Prabowo\u2019s choice to nominate Destry and Aida is a\ntechnocratic choice. This step dispels the notion of BI politicisation\nand demonstrates a commitment to keeping financial markets conducive. On\nthe other hand, this can certainly be interpreted as respect for BI\u2019s\nindependence.<\/p>\n
We do not want to damage BI\u2019s independence, which is a fruit of\nreform. What we need now is for each party to play its role with clear,\nmeasurable financial sector leadership that provides certainty on future\npolicy direction to market participants.<\/p>\n
BI\u2019s challenges<\/p>\n
BI\u2019s two main mandates are controlling the rupiah exchange rate and\ncontrolling inflation. New regulations give it the additional task of\ncontributing to economic growth and developing MSMEs.<\/p>\n
But behind that mandate, we honestly do not yet have a policy core\nguiding the direction of monetary policy. By comparison, China has a\npolicy direction with a tendency to weaken the yuan against the US\ndollar. Because by weakening the yuan, the prices of their export goods\nbecome more competitive in the global market. And the United States is\noverwhelmed by the flood of Chinese products, so it has had to erect\nbarriers, and a trade war has ensued.<\/p>\n
Conversely, in recent years, at least since the Russia-Ukraine war\nbroke out in 2022 accompanied by rising global commodity prices, the\nUnited States has tended to face high inflation and a trade deficit. As\na result, it has chosen a monetary policy that tends to strengthen the\nUS dollar, as reflected in the US dollar index since 2022.<\/p>\n
Reflecting on the policies of China and the United States, we\nhonestly do not yet have a policy narrative to frame the direction of\nfiscal and monetary policy. This is what needs to be formulated\nimmediately by the Finance Minister and the new BI leadership going\nforward. What is the national policy core going forward? Will it\nstrengthen commodity export expansion so that it needs support from a\nlimited rupiah weakening policy?<\/p>\n
Or will we choose to reduce inflation in the food and energy sectors,\nwhich are heavily supported by imports, so that the direction of\nmonetary policy needs to strengthen the rupiah? Or are there other\noptions? This is what needs to be formulated by the Finance Minister and\nthe BI Governor going forward. This orchestration is important, as well\nas to send a signal to the market about the direction of monetary policy\ngoing forward.<\/p>\n
I believe that given the long-standing relationship between Purbaya,\nthe Finance Minister, and Destry, the BI Governor candidate, they may\neven already be at soulmate level. It should not be difficult for the\ntwo of them to work together to formulate the policy core and share\nroles.<\/p>\n
Said Abdullah, Chair of the DPR Budget Committee<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/welcoming-bank-indonesias-new-captain-1787057636", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }