Indonesia Finance Minister’s reassurance helps stabilise markets

KUALA LUMPUR - Indonesian Finance Minister Sri Mulyani Indrawati pledged to improve the government’s policies after protesters looted her house over the weekend, a signal to investors that she will continue to manage the economy and back efforts by President Prabowo Subianto to ease public anger. 

“We apologise,” she wrote in a pair of posts on her personal Instagram account on Sept 1, adding that her duties were very complex, and she understood the demands of the public.

“There are certainly still many shortcomings,” she said. “We will continuously improve.”

The minister’s statements will be welcome news for investors who view her as a safe pair of hands in maintaining fiscal discipline. Unfounded rumours swirled in recent days that she planned to resign, prompting reporters to ask Cabinet members if she planned to step down. 

“People expected Indrawati would resign after the looting at her house,” said Mr Ahmad Mikail Zaini, chief economist at Sucor Sekuritas. Her staying on board “revives confidence that Indonesia’s economy will be guarded with prudence”.

Protests had surged over the weekend nationwide, leaving at least five dead, in the most serious political test of Mr Prabowo’s 10-month presidency. 

Stocks rebounded on Sept 2 after the previous day’s sell-off, with the Jakarta Composite Index rising as much as 1.3 per cent. The rupiah was little changed. Yields on 10-year bonds fell 2 basis points to 6.4 per cent, a sign of some investor confidence. 

For foreign investors, Dr Mulyani  is arguably the most important figure in Mr Prabowo’s Cabinet, the third administration the 63-year-old economist has served in. She also spent time as a top official at the World Bank, and is a regular presence at International Monetary Fund gatherings in Washington, bolstering her reputation for fiscal prudence and raising her profile among bondholders and global finance peers. 

“Indrawati helps to manage the balance sheet, and with her on board investors have greater confidence that the balance sheet will not go wrong, they will not abuse the fiscal budget,” said Mr Ng Xin-Yao, a fund manager at Aberdeen Investments.

Dr Mulyani’s comments echo similar sentiments from her boss, Mr Prabowo, who has sought to express sympathy for the causes of public angst, including economic insecurity and anger over inequality, while simultaneously backing a firm response by the military and police. 

In a meeting with labour leaders on the evening of Sept 1, Mr Prabowo pledged to ask Parliament and party leaders to immediately deliberate on an asset seizure Bill and a revision to the labour Bill requested by workers, according to a statement from the State Secretariat.

The President will also soon sign a presidential decree on the formation of a national labour welfare council, according to Mr Said Iqbal, leader of the Indonesian Labour Union Confederation.

Back in May, Mr Prabowo had promised to create the council, which would be tasked with studying the situation of workers and advising the President on various laws and regulations related to labour issues.

“Recurrent protests, especially with a risk of escalation, bode poorly for private sector investment and confidence,” Ms Radhika Rao, senior economist at DBS Bank, wrote in a note, adding that any new revenue-raising measures are now off the table, given public anger over earlier austerity measures. “Sentiments are likely to be jittery in the FX space,” Ms Rao wrote.

In her social media posts, Dr Mulyani shared images of several news reports about the looting over the weekend, including pictures of her scattered belongings.

She said that she had sworn to uphold the Constitution and the law, and public dissatisfaction with certain laws and violations can be expressed through judicial review. “Our task is to continue to improve the quality of democracy in a civilised manner,” she wrote. “Not through anarchy, intimidation and repression.” BLOOMBERG