Destry Becomes BI Governor's Single Candidate, Market Welcomes Positively and Rupiah Strengthens

PJs of BI Governor Destry Damayanti (Photo: Antara)

JAKARTA - President Prabowo Subianto officially proposed the name of the Acting Governor of Bank Indonesia (BI) Destry Damayanti as the sole candidate for the new Governor of BI to the DPR RI.

Minister of State Secretary Prasetyo Hadi said the government had submitted a presidential letter (surpres) regarding the appointment of Destry Damayanti as the only name of the candidate to replace the Governor of Bank Indonesia (BI) to the DPR RI.

"So it's a single name, one name, namely in the name of Destry Damayanti's mother who is now the Acting Governor of the BI," he said in a press conference, Monday, August 10.

Head of the Center for Macroeconomics and Finance of the Institute for Development of Economics and Finance (Indef) Rizal Taufikurahman assessed that Destry's nomination received a positive response from the market because it provided certainty about the direction of the central bank's leadership.

According to Rizal, Destry is a figure who has been known by market participants and has experience as part of the BI Governor's Board and his nomination as the sole candidate is considered to reduce uncertainty after Perry Warjiyo resigned from the position of BI Governor.

"In the context of the financial market, policy certainty and continuity are very important for rupiah stability," he explained in his statement.

He explained that the certainty of leadership can reduce the risk of policy or policy risk premium so as to also support the stability of the rupiah. However, the strengthening of the rupiah cannot be entirely attributed to Destry's nomination.

According to him, external factors also play a major role, especially the weakening of the US dollar and changes in market expectations regarding the direction of the Federal Reserve's interest rate policy, so that the strengthening of the rupiah is a combination of positive global sentiment and reduced uncertainty from within the country.

"So, the strengthening of the rupiah reflects a combination of global tailwinds and reduced domestic uncertainty. The news of Destry's nomination strengthens this positive sentiment, but it is not the only driving factor," he explained.

Rizal added that the future challenges are not only related to the figure of the Governor of BI, but also the ability of the new leader to maintain the independence, consistency, and credibility of monetary policy.

"If the new leadership is able to maintain the stability of the rupiah, the credibility of interest rates, and fiscal-monetary coordination without reducing BI's independence, then the positive sentiment can last longer. The market is basically not just buying the name Destry, but buying the certainty and credibility of policies," he said.

Similarly, currency and commodity observer, Ibrahim Assuaibi, also assessed Destry's nomination as the sole candidate in line with market expectations.

According to him, the market tends to expect continuity of leadership from figures who have been in the central bank institution.

"Because we see that usually when the Governor of BI resigns, the incumbent is appointed and it is true that the incumbent is nominated as a replacement for Perry Warjiyo. This means that the market accepts the election of Ibu Destry as a candidate for Governor of BI," he said.

In addition to the factor of the nomination for the Governor of BI, Ibrahim assessed that the strengthening of the rupiah was also supported by a number of domestic economic indicators, namely economic growth above 5 percent, a strong position of foreign exchange reserves, and a consumer confidence index that is still above the level of 100 as supporting factors.

"What does it mean? The economic data is quite good, this is what makes the rupiah price strengthen again sharply," he said.

On the other hand, Ibrahim said the easing of tensions in the Strait of Hormuz also provided a positive sentiment to the market and the agreement between Iran and Oman to manage the Strait of Hormuz was considered to reduce concerns about disruptions to energy supplies and global trade routes.