By Stefanno Sulaiman and Gayatri Suroyo
JAKARTA, Jan 19 (Reuters) - Indonesian President Prabowo Subianto has nominated his nephew to join the central bank's board of governors, his spokesperson said, amid growing concern about its independence as the government seeks more support for ambitious economic targets.
Investors have worried that independent monetary policymaking in Southeast Asia's largest economy might be under pressure as Prabowo targets economic growth of 8% by 2029, from about 5% now.
The rupiah currency hit a nine-month low on Monday amid uncertainty from a new U.S. tariff policy, concerns over Indonesia's widening fiscal deficit and news of the central bank nomination.
Prabowo's nephew Thomas Djiwandono, currently a deputy finance minister, is one of three nominees whose names have been submitted to parliament, presidential spokesperson Prasetyo Hadi told reporters.
The nomination follows the resignation of Bank Indonesia's (BI) deputy governor Juda Agung, he said, before the end of his tenure in 2027.
Finance Minister Purbaya Yudhi Sadewa said Agung will join the finance ministry, representing a swap of top officials that would not hurt the independence of either institution.
"There may have been speculations that because Thomas is going there, the (central bank's) independence is gone. I disagree," Purbaya said.
"Once they realise it's not the case, (the rupiah) will strengthen," he said, adding his ministry and BI will synchronise fiscal and monetary policies to spur faster economic growth.
BI confirmed in a statement that deputy governor Agung submitted his resignation on January 13.
The central bank further said it would remain focused on maintaining rupiah and financial system stability to support sustainable economic growth.
Djiwandono and Agung did not immediately respond to requests for comment.
SUITABLE CANDIDATE
U.S.-educated Djiwandono is a former businessman and a member of the ruling party.
The two other nominees are central bankers Solikin Juhro and Dicky Kartikoyono, said Mukhamad Misbakhun, head of parliament's financial commission.
"Tommy Djiwandono is someone with academic competence, bureaucratic experience and personally he is humble. He is a befitting figure for a deputy governor of Bank Indonesia," Misbakhun said.
BI starts a two-day monetary policy meeting on Tuesday, with analysts expecting it will keep interest rates unchanged.
Michael Wan, senior currency strategist at MUFG, said unlike BI's past cycles, the bank is unlikely to hike rates to defend the rupiah, with the focus now tilted more towards supporting growth.
"The news around President Prabowo potentially nominating his nephew to BI Board of Governors has resulted in some jitters among market participants around perceived reduction in monetary policy independence for BI," Wan said.
Reuters reported Djiwandono's nomination earlier on Monday, citing sources.
Each member of BI's board, comprised of a governor and several deputy governors, has a voting right to decide key interest rate levels and determine its policy.
Members are usually central bankers, economists or former executives of commercial banks appointed by the president with parliamentary approval.
The move comes as parliament discusses a bill with provisions to strengthen the central bank's role in supporting economic growth.
(Additional reporting by Ankur Banerjee in Singapore; Editing by Gibran Peshimam, Clarence Fernandez, Susan Fenton and Toby Chopra)
