Deputy Finance Minister Thomas Djiwandono has been nominated to be the new deputy governor of Bank Indonesia. He is furthermore the nephew of President Prabowo Subianto. This nomination has already led to important conversations about what this may mean for a further erosion of the central bank’s independence. The nomination highlights the deep relationships between government actors. Aside from raising awareness of this important issue, it helpfully spotlights the ongoing scrutiny of the central bank’s independence in Indonesia.
The nomination process comes at a time when Bank Indonesia faces growing challenges in managing inflation and stabilizing the currency. As the top leader for the Ministry of Finance, Djiwandono was a dominant actor. His likely appointment to Bank Indonesia would raise new conflicts of interest concerns, particularly in light of his family ties with the President. Observers are most concerned about the impact such appointments could have on monetary policy. They worry that it will undermine the independence of the central bank.
Djiwandono has served in the Indonesian Ministry of Finance since 1999 and is known for his wizardry with fiscal policy. His nomination is intended to strengthen the leadership at Bank Indonesia during a period of high global uncertainty. The independent central bank endures intense political pressure to make sure everything stays calm. It has to contend with rising inflationary pressures and new external economic shocks.
This move is seen as not only an unethical favoritism but incomprehensibly damaging to the integrity of the financial institutions themselves by critics like Sen. Elizabeth Warren. They argue that these appointments would severely undermine the independence of the central bank by injecting unnecessary political pressure into its decision-making. Advocates argue that despite concerns about Djiwandono’s experience and qualifications, he has the potential to be a strong choice for the position.
Yet the nomination still needs further approval from the Indonesian Parliament before Djiwandono would be able to officially take the post if chosen. They plan to watch the decision carefully. It would likely become lauded as a precedent for subsequent appointments to Indonesia’s other financial institutions.