Indonesia central bank chief detained in graft case

 

Indonesia's anti-graft agency detained outgoing central bank governor Burhanuddin Abdullah over a graft case on Thursday, the agency said, the latest twist in a high-profile case that has hit morale at the battered bank.

 

Abdullah, whose five-year term ends on May 17, and two of his colleagues are suspects in a case where a foundation linked to Bank Indonesia had illegally paid members of parliament. Abdullah has denied any wrongdoing.

 

The news did not have any significant market impact, with stocks ending up and the rupiah largely stable. Scores of high ranking officials have been detained amid President Susilo Bambang Yudhoyono's fight against graft in a country consistently rated as one of the most corrupt in the world.

 

"It's true that we have detained the central bank governor at the police headquarters for 20 days since today," Johan Budi, a spokesman for the country's anti-graft agency, also known as the Corruption Eradication Commission (KPK).

 

Abdullah was detained after around 6 hours of questioning at the anti-graft office. He smiled to reporters but did not give any comments.

 

A central bank spokesperson said senior central bank deputy governor Miranda Goeltom will be acting governor if Abdullah is unable to do his job.

 

"The board of governors of Bank Indonesia regret and is saddened by the detainment of our leader, governor Burhanuddin Abdullah, as well as two other senior officials Rusli Simanjuntak and Oey Hoey Tiong who have already been detained by the KPK," the central bank said in a statement.

 

The statement said the bank has procedures and systems in place to maintain macroeconomic stability.

 

Analysts said the news was unlikely to have any major market impact. The bank has undergone a series of reforms following various probes in the past decade, particularly over its controversial role in lending billions of dollars in emergency funds to banks at the height of the 1997-98 financial crisis.

 

"The latest development surrounding the central bank governor is not likely to cause a big impact to financial markets, but essentially means the new central bank governor has some sentiment damage control to do when he takes the place after May," said Singapore-based currency strategist Christy Tan at Bank of America.

 

Indonesia's parliament on Monday appointed chief economics minister Boediono as the next central bank, ending weeks of uncertainty over who would head the central bank at a time when Indonesia faces an increasingly difficult economic environment due to soaring prices.

 

Boediono told legislators during a parliamentary hearing on Monday that probes into Bank Indonesia have hurt morale and could affect its ability to carry out monetary policy.

 

"I feel there has been a drop in terms of morale, as well as indecisiveness at Bank Indonesia," Boediono told the parliamentary hearing.

 

Analysts said Boediono faces a tough job: he must establish the integrity of an institution that's been buffeted by allegations of graft, while curbing inflation as food and fuel costs soar.

 

A respected technocrat, Boediono takes over at a time when interest rates in Southeast Asia's biggest economy appear to have bottomed out, and inflation, now 8.17 per cent, is on the rise due to surging prices for oil, rice, and other basic staples. (Reuters)