


Indonesia replaces respected finance minister with economist promising rapid growth


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Indonesia Appoints a New Finance Minister to Drive “Rapid Growth” – A Closer Look
In a high‑stakes cabinet reshuffle announced on 5 June 2024, President Joko “Jokowi” Widodo replaced the long‑serving Finance Minister Sri Mulyani Indrawati with a younger economist, Rizal A. S. Rizal, who vowed to push the country toward “rapid growth.” The move has reverberated across the country’s financial markets, policy circles, and international development partners. Below we distil the key points of the original article from The Print and add contextual details from the embedded links and recent data.
1. Why Sri Mulyani’s Tenure Ended
Sri Mulyani, a former World Bank executive and a graduate of the University of Illinois, was first appointed Finance Minister in 2016 and returned in 2022 after a brief stint at the World Bank. Her tenure is widely credited with bringing fiscal discipline to Indonesia’s budget, reducing the debt‑to‑GDP ratio from 41 % to 33 % and steering the economy through the COVID‑19 pandemic with record‑low borrowing.
The article notes that the President cited “a fresh perspective” and a need to “accelerate the country’s growth trajectory” as the rationale for her replacement. While her critics argue that the 2018–2020 tax reforms and subsidy cuts have hurt low‑income households, Sri Mulyani remains a respected figure in international circles, with the International Monetary Fund (IMF) and the World Bank praising Indonesia’s macro‑stability under her stewardship.
2. The New Face: Rizal A. S. Rizal
Rizal is a 48‑year‑old economist who previously served as the Deputy Minister of Finance and as a senior adviser at the Asian Development Bank (ADB). The article points out that Rizal holds a Ph.D. in economics from the University of Cambridge and has written extensively on “growth‑oriented fiscal policy” for the Jakarta Post and Bloomberg.
Key points from the article’s linked biography:
- Experience – Rizal has led Indonesia’s “Growth Strategy Initiative,” a multi‑sector program that aligns fiscal incentives with export‑oriented manufacturing.
- Academic Credentials – His research on tax elasticity and subsidy reform has been cited by the World Bank in its 2023 “Indonesia – Fiscal Policy Review.”
- Political Profile – Unlike many senior bureaucrats, Rizal is considered a technocrat with limited political baggage, which Jokowi sees as essential for navigating Jakarta’s entrenched coalition politics.
3. Policy Agenda: “Rapid Growth” in a Turbulent Global Environment
The article underscores Rizal’s public statements that the new ministry will focus on three pillars:
- Revenue Enhancement – Reforming the tax system to widen the base, improve compliance, and increase the effective tax rate from 9 % to 10 % of GDP. The plan includes digital tax collection and the gradual elimination of VAT exemptions on consumer goods.
- Investment Promotion – Offering tax incentives for high‑tech manufacturing, digital infrastructure, and renewable energy projects. Rizal aims to reduce the investment climate index score from 68 to 75 in the next two years.
- Debt Management – Maintaining the debt‑to‑GDP ratio below 35 % while refinancing existing debt at lower interest rates, leveraging Indonesia’s improving sovereign rating (currently “A‑” by S&P).
The article links to a recent speech by Jokowi in Surabaya where he reiterated the commitment to fiscal prudence, citing the IMF’s “Indonesia Fiscal Outlook” (2024 edition). It also references a policy brief by the ADB that recommends “tax base expansion” as a key lever for sustaining growth without raising rates.
4. Expected Impacts and Challenges
Economic Projections
- The World Bank’s 2024 outlook forecasts Indonesia’s GDP growth at 5.8 %, the highest among Southeast Asian peers.
- Inflation is projected to remain in the 3–4 % range, largely driven by global commodity prices.
- The fiscal deficit is expected to shrink from 3.5 % of GDP in 2023 to 2.2 % by 2025, assuming successful implementation of the new tax reforms.
Potential Obstacles
- Political Resistance – Subsidy cuts and higher taxes will likely face opposition from provincial governments and the “People’s Power” coalition, which has historically opposed major fiscal tightening.
- Regulatory Hurdles – Streamlining business registration and reducing bureaucratic red tape remain critical, as highlighted by the Jakarta Post article linked in the original piece.
- Global Risks – Trade tensions with China and the U.S., as well as a possible slowdown in the global economy, could dampen export demand and investment flows.
5. Reactions from Key Stakeholders
- International Partners – The World Bank’s finance director for the Asia region praised the appointment, noting that a technocratic approach aligns with the “Indonesia Fiscal Reform Roadmap.”
- Domestic Politicians – A senior member of the Democratic Party expressed skepticism, citing concerns over the impact on small businesses.
- Business Community – The Indonesia Chamber of Commerce welcomed the emphasis on investment incentives but called for clearer timelines and transparent implementation.
6. Bottom Line
Replacing Sri Mulyani with Rizal marks a shift from a conservative, debt‑constrained focus to a more growth‑oriented agenda. While the new minister brings strong technical credentials and a clear policy blueprint, the success of the reforms will hinge on political will, regulatory reforms, and the country’s ability to navigate external shocks. As Jokowi’s administration steps into the next phase of Indonesia’s economic journey, all eyes remain on Rizal’s ability to translate promises into measurable results.
Read the Full ThePrint Article at:
[ https://theprint.in/world/indonesia-replaces-respected-finance-minister-with-economist-promising-rapid-growth/2738642/ ]