World Bank President Robert Zoellick announced this morning that Indonesia’s Finance Minister Sri Mulyani will be appointed one of three Managing Directors at the World Bank, the most senior position next to Zoellick. She is scheduled to start on June 1st. She will likely have to give up her Finance Minister post to move to Washington.
With Sri Mulyani’s strong and credible reform credentials, her departure is likely to be seen negatively by the market, not to mention that Indonesia has not had a BI Governor in almost a year.
Thus, vacancies in two of the most important economic posts will raise some concerns about the credibility of macro policies and the pace of reforms. Nonetheless, we think despite her departure, Indonesia’s track record of prudent fiscal policies will likely remain intact.
Market reaction to the news has been muted so far, with weakness in Indonesia assets – IDR recaps selling off 20-25bps, Indonesia CDS wider by 10bps and Indo$ cash bonds down by 0.5pts – driven more by global risk aversion on EU sovereign crisis rather than Indonesia political developments.
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