JAKARTA: When Purbaya Yudhi Sadewa got a call summoning him to Indonesia’s presidential palace, he immediately thought it was a prank. Just a few hours later, he was hurriedly sworn in as finance minister.
"I thought I was being scammed. I checked whether the number was correct, and turned out it was true,” Purbaya told reporters on Monday (Sept 8). "It’s a shock.”
Suddenly gone was longtime finance minister Sri Mulyani Indrawati, a former World Bank executive who held a firm budgetary line through several administrations and won the respect of international investors. Her fiscal discipline did not gel with President Prabowo Subianto or the protesters who stormed her house late August amid nationwide demonstrations over livelihood issues, and she lasted less than a year in Prabowo’s government.
Her successor Purbaya says faster growth will placate the "small part” of the population who have taken to the streets.
"Once I create economic growth of six per cent, seven per cent, that will disappear automatically. They will be busy looking for work and eating well instead of protesting,” Purbaya said in a late Monday briefing following his appointment. "The president’s message is to reverse the economic course, create faster economic growth, as quickly as possible.”
Prabowo wants to bulk up outlays to super-charge Indonesia’s growth as South-East Asia’s largest economy loses momentum and discontent mounts, aiming to avoid more protests. At the same time, investors are worried about the ramifications of fiscal largesse and the potential for a budget blowout without Indrawati around to check Prabowo’s demands. Indonesian assets slumped on Monday on news of her departure.
"His approach remains to be seen but there is inherent pressure building to gear fiscal policies towards becoming more populist,” Oversea-Chinese Banking Corp. economist Lavanya Venkateswaran said of Purbaya.
According to Purbaya, 61, the president’s marching orders are to reverse Indonesia’s malaise. He said the economy could expand by more than six per cent in the "not-too-distant future” (the current pace is around five per cent) and potentially even hit Prabowo’s eight per cent target in two to three years.
That seems ambitious. In a June report, the World Bank estimated Indonesia’s economy will grow at an average annual rate of 4.8 per cent over the 2025-2027 period, though deregulation and reforms could lift that pace. And in an August Bloomberg survey, economists projected growth of 4.8 per cent this year and 4.9 per cent in 2026.
Faster growth could require a much more expansive fiscal policy, particularly ramping up funding for Prabowo’s priority programmes like free lunches and public housing, which have helped bolster the president’s personal popularity. It’s unclear from Purbaya’s comments so far how he would fund any higher spending, given revenue is shrinking and any move to raise taxes risks setting off fresh unrest.
According to Dedi Dinarto, lead Indonesia analyst and senior associate in Singapore at public policy advisory firm Global Counsel, the changes at the finance ministry show the administration’s push to consolidate power and ensure the ministry fully supports Prabowo’s agenda.
"This decision is less about performance and more about politics,” Dinarto said.
While Purbaya has pledged to keep state finances healthy, he also said that "if it is not spent, the economy will not run.” He has not yet commented specifically on whether he will keep the budget deficit below the legal limit of three per cent of gross domestic product - a number closely watched by investors.
The government last month estimated a budget gap of 2.78 per cent of gross domestic product for 2025 and 2.48 per cent for 2026.
Indonesian stocks fell late Monday before the announcement, and the offshore rupiah slumped afterwards. The finance chief sought to assuage markets by saying he has regularly worked with Indrawati and would be a steady hand.
Further negative market reaction could curb Purbaya’s room to maneuver. Following Indrawati’s removal from office, Bank Indonesia’s next interest rate cut is now likely in October rather than this month, Citi Research said in a note.
"I understand very well what prudent fiscal policy means,” Purbaya said, talking about an approach where he would not seek to dismantle the existing system in the ministry but rather "optimise” it - without going into detail. "Usually, the bad thing about new leaders is that they tear up the old system and make a new one, because they want to make a new milestone. I will not approach it like that.”
Before joining the government, Purbaya was an economist at the Danareksa Research Institute and later served as the president director of PT Danareksa Sekuritas in Jakarta. He earned his bachelor’s degree in electrical engineering from the Bandung Institute of Technology in Indonesia, then his master’s and doctorate degrees in economics from Purdue University in Indiana.
Purbaya is also a self-proclaimed supporter of the ideas of Prabowo’s father Sumitro Djojohadikusumo, who was a finance minister in the 1950s, a trade minister in the 1970s and played a role in Indonesia’s industrialisation, serving under both presidents Sukarno and Suharto.
"Sumitronomics,” Purbaya said in June, achieves political and social stability through the equitable distribution of gains. It leans on two things to support the economy, according to a report by the Kontan newspaper: government spending alongside private sector investment.
While the past decade has seen Indonesia boost private spending by restricting mineral exports and encouraging onshore refining, Prabowo wants to go further. He aims to capture a total of 13,032 trillion rupiah (US$800 billion) in investments through 2029, with 1,905 trillion rupiah targeted for this year.
The president has also created a sovereign wealth fund that is expected to jointly invest with private investors, as part of a vision to supercharge growth in the same way the late Deng Xiaoping helped turn communist China into an economic powerhouse.
Purbaya, who says his experience with markets and government means he doesn’t need time to learn his new job, is now tasked with delivering Prabowo’s vision.
"Purbaya is an able economist with years in the markets,” said Achmad Sukarsono, an analyst at consultancy Control Risks. "However, Purbaya’s international credibility is pale in comparison to Sri Mulyani’s. He also needs to be prove whether he can balance the budget with all of these costly priorities and find a way to find revenue without strangling the masses with taxes.” - Bloomberg
