9-3-2024 (JAKARTA) As preliminary results of Indonesia’s presidential election suggest an imminent victory for Prabowo Subianto, speculation intensifies over the composition of his new cabinet. Investors and economists express unease, particularly regarding the future of Finance Minister Sri Mulyani Indrawati, a key figure in Indonesia’s economic stability.
Prabowo’s ambitious election promises, including free school lunches for millions and a potential increase in the debt-to-GDP ratio to 50%, raise fiscal concerns. Credit rating agencies warn of potential budgetary strain, with estimated costs for the school lunch program reaching $29 billion annually.
Indrawati, known for her fiscal discipline, is expected to step down after President Joko Widodo’s term concludes. The potential absence of Indrawati, a reform-oriented finance minister, raises concerns about the country’s fiscal stability. Her reported disagreements with Prabowo on military procurement and social welfare have fueled speculation about her departure.
Dedi Dinarto, lead Indonesia analyst at Global Counsel, notes historical disagreements between Prabowo and Indrawati, highlighting the risk her absence poses. Investors are closely watching who will handle the finance portfolio and the impact on fiscal policies, especially with concerns over Prabowo’s election promises.
Harue Shimato, chief economist at Mitsui & Co. Global Strategic Studies Institute, views Indrawati’s likely absence negatively, expressing concerns about potential financial turmoil. The departure of a key figure responsible for cleaning up the Finance Ministry could raise fears of corruption returning, potentially destabilizing fiscal policies.
Prabowo, attempting to ease worries, commended Indonesia’s economic and fiscal management on Tuesday, emphasizing determination to maintain a positive trajectory. Despite assurances, questions linger about the direction of economic policies under the new leadership.
Potential candidates for finance minister include Budi Gunadi Sadikin, the current health minister and former president of Bank Mandiri, and Mahendra Siregar, chairman of the Financial Services Authority. Other notable figures considered for key cabinet posts include State Enterprise Minister Erick Thohir, Rosan Roeslani, and Muhammad Lutfi.
While accommodating political interests in the cabinet formation poses challenges for Prabowo, analysts urge prioritizing technocrats over politicians for economic and finance roles. The global economic landscape and geopolitical uncertainties add pressure on Indonesia’s economic growth, emphasizing the need for sound economic management.
