Indonesia's President Prabowo Subianto has appointed Suahasil Nazara as the new finance minister, marking the third change in this role in less than two years. The announcement came on Monday as the country faces the challenge of restoring investor confidence in Southeast Asia's largest economy.
Suahasil, who had been serving as deputy finance minister since 2019, replaces Purbaya Yudhi Sadewa. Purbaya was dismissed just over a year into his tenure. The reshuffle unfolded as Purbaya was seen leaving a parliamentary hearing, while Suahasil and other senior officials were at the state palace for a swearing-in ceremony.
After his inauguration, Suahasil emphasized the need for a credible state budget. He pledged to keep the fiscal deficit below the 3% of GDP limit set by law, ensuring the budget supports key government programs. "I will continue to run a trustworthy state budget, ensure trustworthy public communication, " he affirmed.
Purbaya's removal follows a period of economic challenges, marked by a declining rupiah and a growing fiscal deficit. His tenure saw controversial decisions, like increasing the fuel subsidy budget as global crude prices rose. This move sparked concerns about funding for essential programs such as the free school meals scheme.
Purbaya, known for his direct approach, was appointed in September last year, succeeding the well-regarded Sri Mulyani Indrawati. His focus on aggressive pro-growth strategies over fiscal caution drew criticism and caused tension with the central bank. Both Fitch and Moody's downgraded Indonesia's fiscal outlook, citing uncertainty in spending plans.
In an interview six months ago, Purbaya admitted that his unconventional policies were a cause for concern, but he remained optimistic that these issues would not persist. He set a six-month timeline for economic improvement, inviting criticism if the economy failed to progress.
Purbaya also stirred controversy by announcing that the sovereign wealth fund, Danantara Indonesia, would transfer 120 trillion rupiah ($6.8 billion) to help meet fiscal deficit targets. However, the head of Danantara later contradicted this claim, stating that no such plan had been discussed.
Despite some economic growth under Purbaya, doubts about the reliability of economic data, particularly growth figures, persisted. Suahasil, with his academic background and a doctorate from the University of Illinois Urbana-Champaign, is expected to bring stability and predictability to economic policymaking.
Angus Mackintosh, an ASEAN specialist at Aletheia Capital, remarked on the appointment, noting that Suahasil's technocratic background and experience working under Sri Mulyani could lead to greater stability.
