MANILA (4th UPDATE) - President Rodrigo Duterte has chosen Budget Secretary Benjamin Diokno as the new governor of the Bangko Sentral ng Pilipinas (BSP), the Palace confirmed Monday.

Presidential Spokesperson Salvador Panelo said Duterte announced his decision to appoint Diokno at the start of Monday’s Cabinet meeting.

“We thank Secretary Diokno for his services to the nation and to this Administration as Secretary of Budget and Management,” Panelo said in a statement.

“In his new tour of duty in the BSP, we expect incoming Governor Diokno to spearhead reform initiatives that will align the financial institution’s operations with international best practices and improve its corporate viability, among others.”

Diokno also confirmed to ABS-CBN News his appointment on Monday, saying the President asked him to “do my job well. Do what’s good for the economy and the Filipino people.” He added he will formally assume his new post on Tuesday, March 5.

He will helm the BSP after its former chief Espenilla passed away last Feb. 23 after a bout with tongue cancer.

Before becoming President Duterte's budget chief, Diokno also headed the Budget Department under President Joseph Estrada and served as Budget Undersecretary under President Corazon Aquino.

Diokno finished his Bachelor's Degree in Public Administration from the University of the Philippines. He earned a Masters Degree in Public Administration and another MA in Economics from the same university.

He also holds an MA in Political Economy from the Johns Hopkins University and a Ph.D. in Economics from Syracuse University in New York.

His appointment as head of the central bank breaks away from tradition since the past two chiefs of the monetary authority were career officials who were employed by the BSP for decades.

As the new head of the central bank, Diokno will have to work with an amended charter, which the late governor Espenilla described as a measure that will foster financial stability in the monetary authority.

Diokno will be in an unusual position directing the Philippines' monetary policy, after years of charting its fiscal policy.

As budget chief, Diokno has pursued an expansionary fiscal policy to support Duterte's ambitious program to overhaul the country's infrastructure.

As inflation hovered near 10-year highs in September last year, Diokno said it was not a concern as long as it supported economic growth.

Last year, the BSP raised interest rates 5 times, hiking the overnight borrowing rate by a total of 175 basis points to 4.75 percent, in a bid to tame inflation.

Finance Secretary Carlos Dominguez said Diokno knows the inner workings of government and industry, and can run a large, complex organization.

"His competence is unquestionable, owing to his deep expertise in macroeconomics and extensive senior management experience in government and the private sector," Dominguez said in a statement.

“His policy expertise and research contributions extend to various areas of public economics, such as the structure and scope of government, tax policies and reforms, public expenditure management analysis, fiscal decentralization, national budget and public debt among other topics.”

Robbi Samson, business development officer at First Metro Securities, noted that Diokno was not one of the frontrunners for the post, and said there may be some initial volatility in the markets on Tuesday.

"The pre-open might give us more insight on just how the market will digest this news overnight, but I do see some volatility, perhaps even a gap up or gap down depending on the general sentiment," Samson said.

Harry Liu, president of Summit Securities meanwhile said Diokno is competent and experienced and his appointment to the BSP will be good for the economy and the market.

Diokno said his replacement in the Budget department will be announced on Tuesday.

Budget Undersecretary Janet Abuel, meanwhile will be officer-in-charge of the budget department according to Dominguez.