JAKARTA — A major disagreement with the finance minister over economic growth strategies preceded Perry Warjiyo's sudden resignation as Indonesia's central bank chief, three sources told Reuters, underscoring months of reported tensions between the country's top financial officials.
Warjiyo himself was not present for his resignation announcement, which was made by his deputy alongside a top aide to President Prabowo Subianto in the early hours of Monday (July 27).
They cited unspecified "personal reasons" for his exit.
Bank Indonesia has been under pressure to support Prabowo's big-growth agenda, even as the rupiah slid to an historic low in June amid concern over Indonesia's fiscal management and central bank independence.
The three people, who have direct knowledge of the matter but requested anonymity for fear of repercussions, did not say whether the disagreement played a direct role in Warjiyo's resignation, but noted differences had recently intensified regarding Indonesia's liquidity policy and its impact on economic growth and the rupiah.
One of the people said Finance Minister Purbaya Yudhi Sadewa's thinking that liquidity should be abundant was in contrast with BI's effort to manage the exchange rate and was often a source of heated internal debate.
"Purbaya wants flush liquidity, but this is a situation of pressure on the rupiah," said the first person, who described Purbaya as having significant influence on the president.
Spokespeople for Purbaya, the president and Bank Indonesia did not respond to requests for comment. Warjiyo could not be reached for comment. The finance ministry declined to comment.
BI has raised interest rates 100 basis points since May in a tightening policy meant to make investing in rupiah assets more attractive to foreign investors to support the currency.
The bank typically keeps liquidity policy relatively tight during times of rupiah depreciation to prevent the use of excess liquidity for speculation.
Purbaya has regularly criticised BI policy since he was appointed in September last year with the stated aim of supercharging the US$1.4 trillion (S$1.8 trillion) G20 economy towards eight per cent growth from a steady five per cent — a key campaign promise for Prabowo.
He replaced longtime finance minister Sri Mulyani Indrawati who had served in the cabinet of Prabowo's predecessor President Joko Widodo.
Warjiyo, too, was first appointed by Widodo in 2018, and was also confirmed for a second term — lasting until 2028 — before Prabowo took office in 2024.
A second person said BI was already wary of Purbaya's attempts to frequently shift cash reserves to state banks, which could cause maturity mismatches.
Purbaya pumped 200 trillion rupiah (S$14.3 billion) into state banks days after he took office, in what he called his most significant policy to jumpstart economic growth. Those funds were previously managed at the central bank.
In early June, Purbaya agreed with Warjiyo to move the funds entirely back to the central bank as part of his support for BI's policy to defend the falling rupiah. Some two weeks later, however, he re-injected the banks with state funds, arguing that his original policy was correct.
While BI officials disagreed with Purbaya's decision to provide excessive liquidity, officials at the central bank also considered a sudden withdrawal of funds harmful, which could trigger a spike in interbank rates, complicating BI's policies, the second person said.
The finance ministry was also concerned about BI's sale of its own high-yielding securities, called SRBI, to attract foreign investors, because this also pushed up government borrowing costs, said the first person.
"Tension occurred between Minister Purbaya and all economic ministers, but the one that most prominently surfaced to the public was indeed Governor Perry," said Wijayanto Samirin, an economist with Paramadina University.
"Purbaya frequently criticised and publicly blamed various BI policies, while Perry occasionally responded to those criticisms," he added, warning that such public spats were harming the government's credibility.
Jahen Rezki, an economist at the University of Indonesia's Institute for Economic and Social Research, said the government's liquidity injection could cancel out the impact of BI's rate hikes.
BI's interim Governor Destry Damayanti met with Purbaya on Monday after her appointment and they discussed liquidity policies, the second person said.
The Prabowo administration recently passed sweeping legislation that reiterated BI's role supporting the government's growth agenda, while empowering lawmakers to make binding recommendations for the central bank.
Earlier this year, Prabowo also appointed his nephew Thomas Djiwandono as a deputy governor at BI.
Warjiyo handed in his resignation on Saturday, just a day after attending a meeting with analysts and investors in Singapore to discuss monetary policy.
The second source said BI officials were scrambling to confirm the rumour of Perry's resignation over the weekend, with Destry cutting short a Bali work trip to rush back to Jakarta.
On Monday morning, Warjiyo spoke to the board of governors in an online meeting, the second source said. "The external communication would be that he resigned voluntarily," the source added.
Warjiyo, who had spent four decades working for BI, did not appear in person or issue a personal statement.
The president's spokesperson said questions about whether there were pressures by the government that led to the resignation were "speculation".
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