Market shocked! The Governor of the Bank of Indonesia resigns, causing the rupiah to weaken immediately. Investors are watching closely for the appointment of a new governor and the impact on the central bank's credibility.
July 27, 2569 at 09.17:XNUMX a.m., Reuters reported that Perry Warjiyo, governor of the Bank of Indonesia (BI), unexpectedly resigned from his position on Monday (July 27). The resignation came as a surprise to financial markets and investors, with analysts believing it could impact confidence due to concerns about the central bank's independence and the direction of the Indonesian government's fiscal policy.
President Prabowo Subianto has approved Vargiyo's resignation. According to Prasetyo Hadi, Minister of the President's Secretariat, who made a statement before the Indonesian financial markets opened, Warjiyo has submitted his resignation to the president. However, the government did not disclose further details about the personal reasons for his resignation and was unable to reach Warjiyo for comment.
After resignation. Destree Damayanti, Senior Vice President of the Central Bank, has been appointed Acting Governor of BI. along with stating that Vargiyo resigned for personal reasons and affirmed that the central bank will continue to perform its duties in accordance with good governance principles and international standards to maintain the stability of the rupiah, the financial system, and support continued economic growth.
The resignation announcement immediately weakened the rupiah, which dropped as much as 0.14% during morning trading, reaching 17,960 rupiah per US dollar. Indonesia's main stock index also fell by as much as 0.68% before recovering by about 0.26% later, reflecting market sentiment as the market continues to assess the impact of the central bank leadership change.
Angus Macintosh, an ASEAN expert from Aletheia Capital. said The market is likely to react negatively to Vargiyo's resignation, as he was regarded as a stable and credible policymaker. The key factor moving forward is the appointment of the new governor. If the government appoints someone politically close, such as Thomas Givandino, President Prabowo's nephew who currently serves as Deputy Governor of BI, the market may question the independence of the central bank, as the position should be independent from political influence.
Warjiyo was first appointed governor of the Bank of Indonesia in 2018 and will begin a second five-year term in 2023. However, BI has recently faced pressure from the government to support President Prabowo's accelerated economic growth policies. Meanwhile, the rupiah weakened to a record low in June amid global market volatility and concerns about fiscal discipline and the central bank's independence.
In addition, the Indonesian parliament passed a new law last month that expands the role of BI in supporting economic growth and empowers legislators to issue binding recommendations to financial regulators and the central bank, raising concerns that BI's independence may be compromised.
Just days before his resignation, Indonesia's central bank surprised markets by keeping its policy interest rate unchanged, while introducing new measures to attract foreign capital and support the rupiah. This came after it had previously raised interest rates a total of 100 basis points since May.
Mirae Asset Sekuritas Securities Company It is stated in the analysis that Investors will be closely watching the appointment of the new central bank governor to assess its impact on the continuity of monetary policy, the credibility of the institution, and the future direction of Indonesia's economic policy.
This event is reminiscent of last year's incident, when the sudden resignation of former Finance Minister Sri Mulyani Indrawati also sent shockwaves through the markets, as investors worried that the government's large-scale spending policies could undermine the country's fiscal credibility.
refer : www.reuters.com
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