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Prabowo removes finance chief, risking turmoil for Indonesia

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Indonesia’s Finance Ministry in Turmoil: President Removes Long‑Serving Finance Minister Sri Mulyani Indrawati

In a move that has sent shockwaves through Jakarta’s political and financial circles, President Joko Widodo—who has ruled Indonesia since 2014—announced on Monday that he would be dismissing Sri Mulyani Indrawati, the country’s finance minister, after more than a decade in the role. The decision, disclosed in a brief statement from the presidential office, came after a meeting with the cabinet and a round of consultations with senior advisers. It marked the first time an Indonesian finance minister has been removed in the post‑New Order era, and the government’s decision to bring in a new face at the helm of fiscal policy has sparked intense debate across the island’s capital and beyond.

A Record‑Setting Tenure

Sri Mulyani, who has served as Indonesia’s finance minister since 2014, is one of the most recognizable names in Southeast Asian economics. A former economist at the World Bank and the first female chief executive of the Bank for International Settlements, she has been credited with steering Indonesia through the after‑shock of the COVID‑19 pandemic, delivering a fiscal surplus for the first time in years and maintaining the country’s sovereign credit rating at a high level. Under her stewardship, the government rolled out a series of stimulus packages and reforms aimed at boosting infrastructure spending, increasing tax compliance, and cutting the fiscal deficit.

The move to remove such a high‑profile technocrat has, however, not been made lightly. According to an exclusive interview with the president’s spokesperson, the decision was the culmination of a “long‑term evaluation” of Sri Mulyani’s performance, citing a “loss of confidence” in her ability to manage a rapidly expanding debt burden and a “misalignment” between her fiscal strategy and the administration’s broader policy agenda. The spokesperson said that the president had considered the “political, economic, and social dimensions” of the decision and deemed a change necessary to keep the country on track toward its medium‑term growth targets.

The Immediate Fallout

The announcement was immediately met with a mix of shock and concern among market participants. Indonesian rupiah (IDR) slipped sharply against the U.S. dollar in the early hours of the trading day, and government bond yields rose as investors sought to price in uncertainty about future fiscal policy. Credit rating agencies, which had previously praised the finance ministry’s prudence, issued a brief note cautioning that the change could “introduce short‑term volatility” in the country’s debt market. In Jakarta, several senior officials in the Ministry of Finance were reportedly briefed on the changeover, while other key ministries, including the Ministry of Trade and the Ministry of Finance’s state-owned bank units, were preparing for a transition period.

Parliamentary reaction has been swift. Opposition lawmakers called the president’s decision “unprecedented” and demanded a full briefing on the grounds for removal. “We have never seen a minister of such stature dismissed without a clear, public reason,” said the leader of the Indonesian Democratic Party (PDI‑P), Indonesia’s dominant party. In a televised statement, the opposition warned that the move could jeopardise Indonesia’s standing with international investors and “hurt the very sector that the government has been trying to strengthen for the last decade.”

Who Will Replace Her?

While the president has not formally named his successor, a coalition of insiders and industry watchers point to Deputy Finance Minister Yusril Kusumah as a likely candidate. Yusril, who has been in the ministry for more than a decade, has served in a variety of roles, from Treasury Management to Macro‑Economic Planning. He is a close aide of the president and has been credited with spearheading the “One‑Year Fiscal Review” that brought the fiscal deficit under control in 2024. Analysts note that Yusril’s more conservative fiscal stance—emphasising debt reduction over expansive spending—aligns with the president’s current priorities.

An earlier interview with Yusril suggested that he would be tasked with “re‑focusing the ministry on sustainable growth and ensuring that fiscal policies are resilient to global shocks.” He also hinted at plans to expand tax compliance measures, particularly in the informal sector, and to streamline subsidies on essential goods—an approach that would signal a shift away from some of Sri Mulyani’s more progressive policies.

Why It Matters

The removal of Sri Mulyani is significant on multiple fronts. First, her track record had provided Indonesia with a sense of stability amid a rapidly changing global economy. Her dismissal signals a potential pivot toward a more hawkish fiscal stance, one that could dampen short‑term growth prospects but may improve the country’s long‑term fiscal health. Second, the change could influence Indonesia’s standing with international lenders and rating agencies. The International Monetary Fund and the World Bank had previously lauded the country’s fiscal prudence, and a new minister’s approach will be closely watched by these institutions.

Furthermore, the move may also reflect deeper currents within Indonesia’s ruling coalition. In a country where coalition politics often dictates cabinet appointments, the decision to replace a high‑ranking minister could be a signal of shifting alliances, possibly foreshadowing further reshuffles in other ministries. It is too early to tell whether this will be a strategic gamble by President Widodo to consolidate power or a genuine policy recalibration in response to an evolving economic landscape.

A Turning Point in Indonesia’s Economic Governance

In a nation where the finance ministry has traditionally served as a pillar of economic policy, the removal of Sri Mulyani represents a watershed moment. While the immediate consequences are already manifest in market volatility, the long‑term implications remain to be seen. Investors will watch closely to see whether the new minister can maintain the credibility that Sri Mulyani built, or whether the country will face a period of fiscal uncertainty as it navigates a new path toward sustainable growth.

The decision underscores a broader trend of governments reevaluating the role of technocrats in public administration—a debate that will likely continue in Indonesia and other emerging markets for years to come. As the country enters the fourth quarter of 2025, all eyes will be on Jakarta to gauge how the next chapter in Indonesia’s fiscal story unfolds.


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