Stock markets in Indonesia experience turbulence following the dismissal of the Finance Minister by Prabowo Subianto
Indonesia's New Finance Minister: Purbaya Yudhi Sadewa Takes Over from Sri Mulyani
In a surprising turn of events, Purbaya Yudhi Sadewa, an economist and the chair of the Indonesia Deposit Insurance Corporation, has been appointed as the new Finance Minister of Indonesia, replacing Sri Mulyani Indrawati who was abruptly removed from her role on Monday.
The abrupt exit of Sri Mulyani has sparked concerns and threatened to shake investor confidence in Indonesia. Her ousting, according to Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, marks a period of uncertainty in Indonesia's fiscal policy.
Purbaya, the new finance minister, has stated that he would ensure fiscal policy remains a powerful instrument to maintain stability, drive economic growth, and achieve prosperity for all Indonesians. Economic experts expect Indonesia's public finances under Prabowo Subianto and Finance Minister Purbaya Yudhi Sadewa to focus on fiscal stability and sustainable growth, with cautious optimism regarding debt management and infrastructure investment.
Prabowo Subianto, the president of Indonesia, has previously expressed interest in expanding spending, including through raising debt. However, he has pledged to stick with the 3 per cent ceiling for fiscal deficits since coming to power last October. Prabowo has questioned the need for a legal mandate that fiscal deficits remain below 3 per cent.
The protests that led to Sri Mulyani's removal were sparked by outrage over generous housing subsidies for lawmakers. The new finance minister, Purbaya, emphasized the need to uphold the principle of prudence to ensure the state budget remains sound, credible, and capable of supporting the national development agenda.
Indonesia's benchmark stock index fell 1.8 per cent on Tuesday, and the rupiah weakened 1 per cent against the US dollar to Rp16,470. Alan Lau, a foreign-exchange strategist at Maybank, attributes the sell-off to investor jitters following Sri Mulyani's removal, but predicts that the currency could strengthen once "markets can get more assured of Purbaya's credibility."
One of the significant challenges facing the new finance minister is the flagship programme to provide free meals for schoolchildren across Indonesia, which costs $28bn annually. Rully Arya Wisnubroto, chief economist at Mirae Asset Sekuritasi Indonesia, predicts that fiscal policy will become more aggressive to pursue high economic growth.
Sri Mulyani had been crucial in maintaining the 3 per cent ceiling for fiscal deficits, which helped Indonesia win investment-grade credit ratings since the Asian financial crisis. It remains to be seen how Purbaya Yudhi Sadewa will navigate the delicate balance between fiscal responsibility and economic growth.
In the midst of this transition, it is essential for the new finance minister to reassure investors and maintain stability in Indonesia's economy. The success of Purbaya Yudhi Sadewa's tenure will significantly impact Indonesia's economic trajectory in the coming years.
