Indonesia’s President Nominates Central Bank Deputy as New Governor

Indonesia’s President Prabowo Subianto has nominated Destry Damayanti, a long-time central bank deputy, as the next governor of the institution, an official announced yesterday.

State Secretary Prasetyo Hadi confirmed that the nomination was submitted to the House of Representatives through a presidential letter, along with names of nominees for Bank of Indonesia (BI)’s senior deputy role, which Destry previously filled.

Destry Damayanti, a seasoned economist and former chief economist at the state lender Bank Mandiri, has served as the interim governor of BI since the unexpected resignation of Perry Warjiyo last month for “personal reasons.” Perry had served as BI’s governor of the central bank since 2018 and still had three years to run on his term.

Both appointments must be approved by lawmakers, but given the size of Prabowo’s majority in the House, this is likely to be little more than a formality. If (or when) she is approved, Destry, who has also worked for Citibank and served on the board of commissioners for the Indonesia Deposit Insurance Corporation, will become the first woman to take on the role on a permanent basis.

The announcement delivered a small fillip to the rupiah, which closed yesterday at 17,755 to the U.S. dollar, gaining 142 points, or 0.79 percent, from its previous close of 17,897.

The markets’ response hints at the fragile state of investor confidence in Indonesia. Since taking office in October 2024, Prabowo has pursued high-spending populist policies, including a multibillion-dollar free meal program, which have widened the fiscal deficit and pushed it toward its legally mandated ceiling of 3 percent of GDP. The former general has also increased the state’s involvement in the Indonesian economy in a bid to maximize the country’s return from natural resources and international trade.

These policies, along with the firing of respected Finance Minister Sri Mulyani Indrawati last September, have unsettled investors and undermined Indonesia’s hard-won reputation for fiscal conservatism.

In March, both Moody’s and Fitch announced ratings outlook downgrades for the country, with the latter citing the “increasing ⁠policy uncertainty and erosion of Indonesia’s policy mix consistency and credibility” and the “growing centralization of policymaking authority.” This came shortly after the global index provider MSCI threatened to downgrade Indonesia to “frontier market” status due to a number of transparency concerns in its stock market. (It is set to announce its verdict in November.)

At the same time, the rupiah has fallen to record lows this year, passing the psychological threshold of 18,000 rupiah to the U.S. dollar in June.

Coming against this backdrop, Perry’s resignation could not have come at a worse time. While he claimed to have resigned for personal reasons, Reuters reported that it followed a “major disagreement” with Finance Minister Purbaya Yudhi Sadewa over the use of liquidity to support Prabowo’s expansive fiscal agenda.

There were fears that Prabowo might nominate his nephew Thomas Djiwandono, whom he appointed as a deputy governor of BI in February of this year, for the top post at the central bank.

The fact that he has chosen to elevate BI’s second-in-command, who boasts an accomplished CV while also having a good working relationship with the government, will likely provide short-term reassurance to investors.

Coordinating Economic Affairs Minister Airlangga Hartarto said yesterday that Destry’s appointment would maintain the trajectory of BI policymaking.

“The current candidate comes from within BI, so she will not change BI’s independence,” Airlangga told reporters, as per the Jakarta Globe. “Mrs. Destry has served as senior deputy governor for more than one term. Communication has been good and she has been inside the institution for a long time.”

However, Josua Pardede, the chief economist at Permata Bank, told Reuters that the true test of central bank independence will come after Destry is confirmed as governor. He warned in particular that risk premiums would rise if BI were to prematurely cut rates or provide liquidity to fund Prabowo’s expensive social programs.

“Destry is seen as having a strong working relationship with the government and the ⁠finance minister,” he told the news agency. “While ​that could be a strength by reducing friction between fiscal and monetary policies, markets will draw a ​sharp distinction between coordination and subordination.”