JAKARTA: Indonesia’s new pro-growth Finance Minister Purbaya Yudhi Sadewa said he faced a difficult job as he officially took office on Tuesday (Sep 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 Monday replaced 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 Southeast Asia’s largest economy.
“The task isn’t easy,” Purbaya said at a formal handover ceremony on Tuesday, citing global challenges in technology and geopolitics.
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 Sri Mulyani has stunned markets, as investors fear the hard-fought fiscal credibility could be eroded by the populist spending plans under Prabowo.
On Tuesday, 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 Sri Mulyani’s departure was announced on Monday, 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 Prabowo took power with promises to lift economic growth to 8 per cent and to introduce some ambitious, and expensive, social programs.
Growth has largely hovered around the 5 per cent mark post-pandemic, with no immediate signs of a spike in economic activity under Prabowo.
Purbaya said on Monday 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 Hasnain Malik, EM 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.”
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