Central Bank Governor of the Year, East Asia Pacific

Agus Martowardojo, Indonesia

  • By Elliot Wilson
  • 13 Oct 2017
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Ambitious transformation plan is paying off


“We need more products, more instruments”
If there is an award for keeping calm and carrying on — remaining steadfast in the face of adversity — Agus Martowardojo would be a valid contender for the prize.


Bank Indonesia’s (BI) Dutch-born central bank chief has endured plenty of highs and lows since being nominated for the top job in 2013 having spent the previous three years as one of the country’s most successful finance ministers.

He has since charted the economy through some choppy waters, keeping the economy motoring along thanks to a judicious sprinkling of interest rate cuts, including six in 2016 alone.

Martowardojo’s genius has been to acknowledge that the innate fragility of Indonesia’s economic model (it remains overly dependent on commodity exports, for instance) meant that a new, more technocratic approach to financial modelling was needed. In 2014, it unveiled a 10 year transformation plan, created in consultation with global advisory firm McKinsey and drawing on the help and advice of the IMF and the Bank for International Settlements.

In an exclusive interview with GlobalMarkets, Martowardojo outlines the benefits of the plan, noting that the country has revamped “not only [its] monetary policy but also [its] payments system, financial stability and money circulation. It’s a huge transformation.”

And so it is. On the monetary side, BI shifted its policy rate to a seven-day reverse repo rate while modifying its reserve requirement system to an averaging system and launching a market-deepening programme, all introduced over a three year period.

Martowardojo admits that the currency, which touched a 10 month low against the dollar in the last week of September, has been weaker than anticipated but expects a strong economy to ensure the depreciation is “temporary”. Economic output is tipped by the World Bank to grow by 5.3% year-on-year in 2017, having swelled 5% on an annualised basis — placing it third among the G20 group of countries — in the first half of the year.

Inflation continues to hover around the 3% mark in line with targets, while Martowardojo said on September 29 that two cuts in the benchmark rates in the previous two months were “sufficient”, signalling a pause in recent policy easing.

Broad and deep

Going forward, key ambitions are to broaden and deepen the onshore financial and capital markets. “We need more products, more instruments,” he says, adding: “The central bank has introduced negotiable certificates of deposits and derivatives like cross-currency swaps, call spreads and interest rate swaps. We have also improved standardisation between different contracts. This will help improve governance for both investors and issuers, which is very important to boosting the financial markets.”

Asked whether he will stay on at the central bank, as he is allowed to after his five-year term expires in May 2018, he suggests it is time to stand aside to let his successor shoulder the burden. “My focus is to end my service so I can work together with the new governor and hopefully he can continue,” he says. “Hopefully the system will find a good central bank governor.”—Elliot Wilson

  • By Elliot Wilson
  • 13 Oct 2017

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