JAKARTA; President Prabowo Subianto’s (pic) economic team overhaul is seen by investors as an acknowledgment that his policies have come at a cost and a signal of a return to more stable policymaking.
By replacing Finance Minister Purbaya Yudhi Sadewa with Suahasil Nazara on Monday (Sept 14), after a similarly sudden leadership change at the central bank, Indonesia has moved to steady the two key institutions - and the relationship between them - following months of concern over the direction of economic policy.
Markets showed some relief, with Indonesian stocks erasing losses and bond yields holding steady. But investors and analysts say these personnel changes, while encouraging, aren’t enough to address the concerns that have fueled US$1.9 billion in capital outflows from Indonesia this year.
The announcements show "there are consequences to the policy prescription over the past 18 to 24 months,” said George Boubouras, head of research, investments and advisory at hedge fund K2 Asset Management. The new appointees "have good CVs” and what markets need is "more open, transparent and credible policy,” he added.
Indonesia’s markets have taken a beating this year - with its stock index still the world’s worst performer - as Prabowo’s interventionist agenda, the Iran war and fears of an index downgrade to frontier status hammered investor confidence. The rupiah slumped and foreign investors fled, a dramatic turn for a commodities-rich nation long a staple of emerging-market portfolios.
Some of that damage has since been repaired. An off-cycle rate hike by Bank Indonesia and signals of policy continuity from new Governor Destry Damayanti helped spark a rebound. The rupiah has appreciated around 3% from June’s record low, foreign funds have bought local bonds for four straight months and the Jakarta Composite Index has entered a technical bull market.
Indonesia’s challenges are also part of a broader global trend of rising debt, deficits and borrowing costs. That gives investors more choices about where to put their money, making it all the more important to keep them onside.
"The Prabowo administration needs to continue to address investor concerns if they’re going to have any credibility with the financial community,” said Steven Grey, chief investment officer at hedge fund Grey Value Management in the US.
"Investors would take the appointment of Nazara as more of a positive if he wasn’t Indonesia’s third finance minister in under two years.”
Nazara brings a familiar face back to the top of economic policymaking. He has spent seven years as deputy finance minister - first under former President Joko Widodo and then under Prabowo - and served under Sri Mulyani Indrawati, the widely respected former finance minister whose ouster in September 2025 rattled investor confidence in Indonesia’s fiscal direction.
His challenge is the same one faced by his predecessors: financing the president’s growth ambitions and expensive social programs, as well as navigating Prabowo’s control over the country’s new sovereign wealth fund, without undermining fiscal discipline. That will require preserving credibility, while shifting spending away from programs that some economist see as having limited payoff.
"Suahasil’s appointment at least eliminates concerns that this strategic position will fall to a politician or a person that is unfamiliar for the markets,” said Liza Camelia Suryanata, head of research at PT Kiwoom Sekuritas Indonesia.
Still, investors will watch how he acts in the role, how independently he operates and how he navigates the government’s political agenda. "Don’t call Suahasil ‘SMI 2.0’ yet,” she added, referring to Indrawati.
For some overseas fund managers, Nazara’s appointment removes a key source of uncertainty. Mark Nash, a London-based money manager at Jupiter Asset Management, bought the rupiah after Bank Indonesia’s rate hike in June and said he would look to buy more of the currency on the news.
"The new finance minister is a known quantity, so markets are on board with it,” Nash said. "The drama of the past looks likely to end. The rate hikes were good, and now this. It’s supportive for Indonesia bonds, and the currency.”
Others want more proof. James Athey, a money manager at Marlborough Investment Management Ltd. who has stayed out of Indonesian bonds, said investors will need more than new faces after months of policy volatility.
"It’s likely that investors want to see more than just personnel changes before they feel comfortable getting back in any sort of size,” he said.
"For now I would still be cautious about Prabowo’s policies.”
That’s where attention will turn next. Investors are watching whether the 2027 state budget, now Nazara’s to shepherd, sticks to the government’s deficit target or slips under Prabowo’s growth agenda. The new finance chief has promised stability and prudence, including keeping the deficit below the legal ceiling of 3% of gross domestic product.
They’re also looking for signs that Bank Indonesia’s new governor can operate with enough independence to serve as a policy backstop, and for more clarity on sovereign wealth fund Danantara’s role in state finances - an area that has continued to worry money managers.
Another test comes in November, when MSCI Inc. will assess Indonesia’s progress on market-access concerns. Regulators have raised minimum float requirements and flagged companies with concentrated ownership, an issue that prompted MSCI to remove some stocks from its indexes in May.
Yet for all the changes, analysts say Prabowo still has the final say on policy.
"We believe fiscal policy will remain prudent, similar to the approach taken by former Finance Minister Sri Mulyani,” said Felix Darmawan, an economist and fixed income analyst at PT BCA Sekuritas.
"Nevertheless, the policies ultimately implemented will largely depend on decisions made by the president.” - Bloomberg.
