By Gayatri Suroyo and Wilda Asmarini
JAKARTA (Reuters) - Indonesia's president on Wednesday appointed World Bank managing director Sri Mulyani Indrawati as the country's finance minister, among a wider cabinet reshuffle aimed at increasing the effectiveness of his team.
Former Indonesian army general Wiranto will replace Luhut Pandjaitan as the chief security minister. The trade, energy, transport and industry ministers are also among those replaced.
The new cabinet, which will be inaugurated later on Wednesday, includes one member of Indonesia's second-largest political party, Golkar, which was in opposition to Widodo when he was elected in 2014.
"Approaching two years of my administration, the challenges we are facing are not easy," Widodo told reporters at the palace. "We have to confront our poverty problems, we need to decrease the economic gap between the rich and poor."
The addition of Indrawati to the president's economic team lifted financial markets, with stocks up more than 1 percent and the rupiah strengthening 0.4 percent against the dollar.
"Sri Mulyani's appointment is a game-changer because it restores a certain amount of investor confidence and means having a steady hand on the tiller with a solid record as a reformer," said Paul Rowland, a Jakarta-based analyst.
In 2010, Indrawati joined the World Bank after serving as both Indonesia's chief economic minister and finance minister under then-president Susilo Bambang Yudhoyono.
Indrawati, who has a Ph.D in economics from the University of Illinois and is not a member of a political party, won praise for successfully managing Indonesia's economy through the 2008 global financial crisis.
"The president wants a dream team to manage economic policies so that we can accelerate (growth). He needs Sri Mulyani," said David Sumual, chief economist for Bank Central Asia.
POLITICAL FACTORS
Some within the president's circle had recommended her for a cabinet position in the first reshuffle, but she turned it down.
Widodo last year replaced key members of his economics team in an effort to boost investor confidence over a flagging economy.
Analysts also said Wednesday's reshuffle was politically motivated as Widodo sought to consolidate support from parties like Golkar that have been keen to join the ruling coalition.
"There is the need to acknowledge the support of parties like Golkar which have thrown their weight behind his government," said Keith Loveard of Jakarta-based Concord Consulting.
Bambang Brodjonegoro, the finance minister that Widodo appointed in 2014, has been shifted to head the country's planning agency.
The change in finance ministers comes just after Indonesia launched a tax amnesty in an effort to bring home billions of dollars that Indonesians have parked overseas.
(Additional reporting by Kanupriya Kapoor, Eveline Danubrata, Nilufar Rizki, Cindy Silviana, Agustinus Beo Da Cost, and Randy Fabi; Writing by Randy Fabi; Editing by Richard Pullin and Richard Borsuk)