Indonesia’s new pro-growth Finance Minister says job is not easy

JAKARTA – Indonesia’s new pro-growth

Finance Minister Purbaya Yudhi Sadewa

said he faced a difficult job as he officially took office on Sept 9, with the currency and stocks falling in reaction to the exit of the long-serving finance czar Sri Mulyani Indrawati.

President Prabowo Subianto on Sept 8 replaced Dr Sri Mulyani, known for her cautious handling of the economy, with economist Purbaya who has promised accelerated growth amid fears of an economic slowdown in South-east Asia's largest economy.

“The task isn’t easy,” Mr Purbaya said at a formal handover ceremony on Sept 9, citing global challenges in technology and geopolitics.

Dr Sri Mulyani said her farewells during the ceremony at the Finance Ministry, with Senior Economic Minister Airlangga Hartarto and Bank Indonesia’s Senior Deputy Governor Destry Damayanti in attendance.

“Nobody’s perfect. When one does their job, there are shortcomings ... I humbly apologise,” she said.

The abrupt removal of Dr Sri Mulyani has stunned markets as investors fear the hard-fought fiscal credibility could be eroded by the populist spending plans under Mr Prabowo.

On Sept 9, the central bank said it intervened in the foreign exchange market to ensure the rupiah moved in line with its fundamentals after the currency fell by more than 1 per cent against the US dollar.

The  main stock index extended losses made after Dr Sri Mulyani’s departure was announced on Sept 8, falling more than 1.5 per cent in morning deals, and Indonesia’s international bonds also weakened.

The reshuffle comes just under a year since Mr Prabowo took power with promises to lift economic growth to 8 per cent and to introduce some ambitious, and expensive, social programmes. Growth has largely hovered around the 5 per cent mark post-pandemic, with no immediate signs of a spike in economic activity under Mr Prabowo.  

Mr Purbaya said on Sept 8 it was “not impossible” to grow at 8 per cent and said he would target 6 per cent to 7 per cent in the shorter term, on the back of increased government and private sector participation in the economy.  

“Mulyani was the safeguard of prudent fiscal policy,” said Mr Hasnain Malik, emerging markets equity and geopolitics strategist at Tellimer. “Her departure will stir up fears of widening deficits under an unconstrained and, after the protests, under-pressure Prabowo.” REUTERS