The Latest on Southeast Asia: Financial Turmoil in Indonesia

Indonesian president Prabowo Subianto unexpectedly terminated his finance minister, Purbaya Yudhi Sadewa, on September 14. The president replaced Purbaya with his deputy, Suahasil Nazara, who now becomes Indonesia's third finance minister in under two years. The firing comes as Indonesia struggles with an oil price shock from the Iran war which, on top of significant outlays for Prabowo's trademark free school meals and village cooperative programs, has increased the country’s fiscal deficit to a projected 2.9 percent of national GDP. This has fueled worries that the deficit will breach Indonesia legal limit of 3 percent of GDP. A string of economic headwinds, not least the rupiah falling to record lows this year, has intensified public scrutiny of Prabowo’s fiscal and monetary policies and cratered his public support to under 40 percent in recent polls.  

Suahasil’s appointment comes during a year of high government turnover, and just six weeks after Bank Indonesia governor Perry Warjiyo’s “surprise resignation” in July. Warjiyo’s replacement, Destry Damayanti, was the sole nominee, and is the first woman to lead Indonesia’s central bank. Destry has promised to prioritize economic stability, vowing to manage inflation while providing sufficient monetary liquidity for economic growth. But she is backing two controversial administration policies: centralizing oversight of strategic commodities exports under the new state-owned investment fund Danantara, and imposing stricter rules on the retention of earnings from exports. Prabowo also appointed his nephew, Thomas Djiwandono, as the central bank’s deputy governor back in January, sparking investor concerns over the bank’s independence. 

Finance Minister Suahasil, an experienced technocrat with seven years as deputy finance minister under his belt, has been tasked by Prabowo to run a credible state budget and keep the country’s fiscal deficit below the 3 percent. Whether it will be possible to do that while the government continues funding Prabowo’s economic policies is unclear. Navigating the financing of Prabowo’s contentious $13 billion free meal program, which already faces allegations of mismanagement, corruption, negligence, and over 50,000 cases of food poisoning, is especially pressing. Suahasil will also play a key role in negotiations between the government and parliament over the 2027 state budget.  

Lauren Mai is a Program Manager and Research Associate for the Southeast Asia Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. 

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