New Indonesia central bank chief faces inflation, scandal - analysts

Parliament in April finally approved Budiono, a highly respected economist, to take over at the helm of Bank Indonesia (BI) after rejecting the president's first two candidates for the job.

But less than 24 hours later, Indonesia's corruption commission swooped on the incumbent Burhanuddin Abdullah, detaining him on suspicion of involvement in a multimillion dollar corruption scandal that had already landed two BI officials in custody.

The affair relates to the alleged use of bank funds to pay lawmakers deliberating amendments to a central bank bill and has seriously damaged the bank's credibility.

Budiono is widely regarded in Indonesia as a safe pair of hands at a turbulent time for the central bank, with rising fuel and food prices threatening the stability of Southeast Asia's biggest economy.

His first task will be to rebuild the confidence of the bank's governors with the investigation into the alleged corruption still going on, said Faisal Baasir, a legislator on the parliamentary commission on economic and financial affairs.

"He needs to instill a fresh confidence and working spirit to Bank Indonesia's board of governors so that they do not become... too afraid to take the necessary steps and measures simply because they feel they may be liable to account for them in the future," he told Thomson Financial.


'Inflation cruncher'

Analysts said Indonesia's rising prices would be ...