R

eform icon minister Agus Martowardojo will officially resume his new job in May as the House of Representatives approved him as the next governor of Bank Indonesia (BI) on Tuesday after an eight-hour meeting.

The approval ended any uncertainty on Darmin Nasution’s successor in the central bank, but left a huge question mark over who will be the next finance minister, especially as Agus won international acclaim for his success in spearheading reforms in the once corruption-riddled ministry.

The major consideration for lawmakers in choosing Agus was the fact that he had been successful in maintaining fiscal discipline and prudence in budgeting during his time as minister, Emir Moeis, the chairman of House Commission XI overseeing economy and finance, said. Emir described the meeting as “the most difficult decision-making process” he ever encountered during his decade-long period as a lawmaker.

“It’s actually a shame that we are losing Agus [as finance minister],” said Emir. “But I’m sure that he will do well at BI.”

Agus was surprisingly nominated as the sole candidate for BI governor by President Susilo Bambang Yudhoyono. The President did not provide clear reasoning on the nomination, but many suspected that Yudhoyono decided to remove him from the Finance Ministry due to intense political pressure from politicians, influential businessmen and Cabinet members, many of whom had been at loggerheads with the strong-willed minister.

The meeting held by the House’s Commission XI to approve Agus’ nomination as BI governor lasted almost eight hours, before it ended in a vote in favor of Agus, 46 to 7.

A legislator who attended the meeting told The Jakarta Post that the meeting “went very far into the issue”, with members of the Golkar Party — the second-largest party in the Commission — demanding a specific political concession to the ruling Democratic Party in return for their votes.

“So much is at stake now, especially as we are ushering in the 2014 elections,” Maruarar Sirait, a lawmaker from the Indonesian Democratic Party of Struggle said on Tuesday when asked about what took so long for lawmakers to make a decision.

Agus’ departure to BI marked a reshuffle within Yudhoyono’s economic team, which is slated to have its third finance minister within a three-year time frame. Economists considered the reshuffle as unnecessary and feared that it might expose the economy to risks at a time when the country had been enjoying robust and stable growth.

In the mid of prevailing uncertainties in the global economy, Indonesia has successfully retained the six-plus percent economic growth for nine consecutive quarters since Agus became finance minister in May 2010 to replace Sri Mulyani Indrawati, who left to become a managing director at the World Bank.

Agus’ upcoming tenure in the central bank will also be marked with significant challenges going forward, with Indonesia already witnessing surging inflation and a widening current account deficit that weighs pressure on the rupiah.

The 57-year-old will face notable challenges in defending the rupiah, Asia’s worst-performing currency in 2012, with the currency lately facing intense pressure. The central bank has seen its foreign exchange (forex) reserves decline to US$105.2 billion, a two-year low, as BI stepped up intervention to defend the rupiah.

With Agus departing to the central bank, economists say that Yudhoyono now faces the difficult task of appointing a finance minister who has the strong skills to maintain fiscal prudence and who can be well-received by the financial market as well as the international community.

“The next finance minister must come from a technocrat background,” Asian Development Bank (ADB) deputy country director Edimon Ginting said after the announcement.

“Economic policies comprise two pillars: monetary and fiscal pillars. With his [Agus’] departure, it is important that the business community is assured that our fiscal pillar remains strong,” he added.