Indonesia central bank nominee puts policy credibility under investor scrutiny

Photo: Thomas Djiwandono and Former President of Indonesia, Joko Widodo. Credit: Tempo Subekti

The nomination of President Prabowo Subianto’s nephew as a deputy governor of Bank Indonesia has prompted renewed scrutiny from economists and market watchers, amid concerns over the central bank’s long-standing independence.

Thomas Aquinas Djiwandono, currently Indonesia’s vice-minister of finance, is among three candidates submitted to parliament to fill a vacant deputy governor post at the central bank. The position became available following the resignation of Juda Agung.

Mr Djiwandono is a close relative of President Prabowo and a senior figure within the ruling Gerindra Party, where he served as treasurer general from 2014 until stepping down after his nomination.

Political proximity and market perception

Analysts say the nomination raises questions not necessarily about technical competence, but about political proximity, a key factor closely monitored by investors in emerging markets.

“Central bank credibility is built on the perception that policy decisions are insulated from political pressure,” said Muhammad Andri Perdana, research director at the Jakarta-based Bright Institute. “Even the appearance of political alignment can increase market uncertainty.”

Bank Indonesia’s independence is protected by law, and its mandate l, maintaining price stability and safeguarding the rupiah, often requires policy decisions that may conflict with short-term government growth objectives.

Government assurances

The government has sought to reassure markets that the nomination will not compromise monetary policy.

Presidential chief of staff Prasetyo Hadi said there were “specific reasons” behind the choice of Mr Djiwandono, though he did not elaborate.

Gerindra executive chairman Sufmi Dasco Ahmad argued that Bank Indonesia’s policy framework is “collective and collegial”, meaning no single deputy governor can influence decisions independently.

Finance Minister Purbaya Yudhi Sadewa also stressed that officials entering the central bank are institutionally separated from the government.

“Once inside Bank Indonesia, they act independently and are no longer part of the executive branch,” he said.

Why independence matters for investors

Economists note that central bank independence is a cornerstone of investor confidence, particularly in economies with exposure to capital flows and exchange-rate volatility.

“When fiscal priorities push for faster growth, monetary authorities may need to tighten policy instead,” said Rijadh Djatu Winardi, an economist at Gadjah Mada University. “That tension is normal, and independence is what makes monetary policy credible.”

Analysts warn that any erosion of this perception could affect inflation expectations, bond yields and currency stability.

Rupiah under pressure

The Indonesian rupiah has weakened by around 1.25% since the start of the year, briefly approaching 17,000 to the US dollar earlier this week.

Most economists attribute the depreciation primarily to external pressures, including geopolitical tensions and uncertainty over US Federal Reserve policy.

However, Mr Perdana cautioned that confirmation of a politically connected figure at Bank Indonesia could add “a risk premium” if investors perceive reduced policy autonomy.

Parliamentary approval process

Parliament is set to hold confirmation hearings on Friday and Monday, with a final decision expected in a plenary session next week.

Alongside Mr Djiwandono, lawmakers will assess two career central bankers: Dicky Kartikoyono, head of payment systems policy, and Solikin M Juhro, head of macroprudential policy.

Who is Thomas Djiwandono?

Born in Jakarta in 1972, Mr Djiwandono is the son of former Bank Indonesia governor Soedradjad Djiwandono and the nephew of President Prabowo.

He was appointed vice-minister of finance in July 2024 by then-president Joko Widodo and retained the role until the end of Mr Widodo’s term, before being reappointed under President Prabowo.

Educated in the United States, Mr Djiwandono holds degrees from Haverford College and Johns Hopkins University and has spent much of his career in finance and corporate leadership.

While his professional background is widely regarded as strong, analysts say investor confidence will hinge less on his résumé, and more on whether Bank Indonesia can convincingly maintain its institutional independence in the years ahead.