The Indonesian government announced on July 27 that central bank governor Perry Warjiyo has resigned for personal reasons. State Secretary Prasetio Hadi stated that Deputy Governor Destry Damayanti has been appointed as the acting governor.

Warjiyo had served as central bank governor since 2018 and was in his second term. His resignation comes at a time when the Indonesian rupiah is under pressure. This year, the rupiah has been one of the worst-performing currencies among emerging markets, prompting the central bank to raise interest rates three times since May.

Indonesia's foreign exchange reserves fell to $144.9 billion last month, the lowest level in nearly two years. Warjiyo faced parliamentary questioning in May over the rupiah's weakness, with some lawmakers even calling for his resignation. Analysts warn that the departure of the governor could increase volatility in the rupiah exchange rate.

An Oxford Economics economist for Asia noted that the leadership change has added uncertainty to the future direction of monetary policy, exposing the rupiah to the risk of further weakening and increased volatility. Reacting to the news, the rupiah temporarily weakened to 18,000 against the US dollar.

Over the past year, Indonesia has lost two senior officials closely tied to economic policy-making. In September last year, following violent protests against the government's economic policies, then-Finance Minister Sri Mulyani was dismissed by President Prabowo.

Furthermore, President Prabowo's nomination of his nephew as deputy governor has raised concerns about the central bank's independence. Investors and economists are also anxious about Indonesia's fiscal and macroeconomic policies. Since taking office in late 2024, Prabowo has launched a series of costly welfare programs, including a $12.7 billion free school meal plan, which is mired in corruption allegations and has been criticized for poor execution.

Last year, Indonesia's fiscal deficit rose to 2.92%, close to the 3% domestic legal limit. The combination of rising oil prices, driven by the Middle East war, and a weak rupiah is further straining the national budget.