Rattled’ Indonesia Central Bank May Hurt Confidence

Jakarta Globe, May 04, 2010

Indonesia’s central bank has been “rattled” by a leadership vacuum and corruption charges against former officials, threatening investor confidence in Southeast Asia’s largest economy, a former governor said.

President Susilo Bambang Yudhoyono has left the Bank Indonesia chief’s position vacant for almost a year since he picked the last governor, Boediono, to be his running mate in the 2009 presidential election. In 2008, Boediono’s predecessor, Burhanuddin Abdullah was found guilty by the country’s anti- corruption court of illegally transferring funds to Indonesian lawmakers. Abdullah denied any wrongdoing.

“People need to see a governor who is there,” Adrianus Mooy, 74, who was governor of Bank Indonesia from 1988 to 1993, said in an interview on April 30. “People want to see the governor’s hands there manage the central bank on a daily basis. But we don’t have any now. It’s like a big puzzle for us.”

Yudhoyono, 60, became the first Indonesian leader to win a second term in office since the dictator, Suharto, was ousted in 1998. While the political stability has lured investors and helped the rupiah to surge more than 10 percent since the president’s July re-election, that momentum may now be at risk as he dithers over appointing a central bank governor.

Indonesia’s central bank cut borrowing costs three times after Boediono resigned and has held the benchmark unchanged at 6.5 percent since August, even as other Asian countries begin to raise interest rates amid a global recovery.

Bloomberg

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