As Indonesia’s President-elect Prabowo Subianto prepares to announce his new cupboard on October 20, coinciding with the presidential inauguration, there’s widespread dialogue about who will lead the nation’s financial establishments, notably the Ministry of Finance.
Indonesia’s Ministry of Finance (MoF) performs a very important role within the nation’s financial administration as a result of legacies of the Asian Monetary Disaster of 1997-1998. The disastrous impacts of the disaster led to a number of key reforms, together with the passage of the Regulation on State Finance, which caps the annual price range deficit at 3 % of GDP and the debt-to-GDP ratio at 60 %. This offers it important powers in planning and monitoring the state price range, consequently lowering the function of the Ministry of Nationwide Improvement Planning, a key establishment throughout the Suharto period.
The dialogue on who will lead the MoF is dependent upon two components: what the president-elect desires, and which technocrats can be found to serve these pursuits.
Prabowo’s View
When Bloomberg reported final month on Prabowo’s plan to extend Indonesia’s debt-to-GDP ratio to 50 % so as to finance his spending applications, notably his free lunch program, some MoF officers discreetly expressed their considerations.
On June 25, members of Prabowo’s financial workforce, together with present Finance Minister Sri Mulyani Indrawati and Coordinating Minister of Financial Affairs Airlangga Hartarto, stated that the debt plan was unfaithful and that Prabowo’s administration was dedicated to the three % deficit set by the legislation. The federal government additionally introduced the $4.3 billion price range for the free-lunch program for 2025 fiscal 12 months, tempering rumors that it may cost as a lot as $29 billion.
Prabowo has eight main priority programs, however these applications will change and there’ll doubtless be changes over time, which is regular in governing. Politically, Prabowo will proceed these of President Joko “Jokowi” Widodo’s applications which have confirmed profitable, reminiscent of infrastructure tasks and social assist applications.
Along with the free lunch program and persevering with Jokowi’s new capital challenge, Prabowo’s administration can have extra ministries and departments to accommodate his giant coalition, after revising the regulation limiting the number of ministers to 34. This may require extra price range allocations.
Funds administration already looms as a very complicated problem for Prabowo’s workforce. A supply near Prabowo’s Gerindra celebration mentioned that the present minister, Sri Mulyani, “is just too conservative and appears crucial of Prabowo’s applications.”
To make sure his agenda is carried out successfully, the president-elect wants somebody versatile sufficient to navigate his applications whereas sustaining an general prudent fiscal coverage. Who’re the main candidates?
The Technocrats
When Jokowi turned president in 2014, he was a mid-level furnishings businessman from the small metropolis of Solo, with no important familiarity with macroeconomics. In distinction, Prabowo is the son of a famend Indonesian economist. His brother-in-law, Sudrajat Djiwandono, was a significant economist and central financial institution governor (1993-98) throughout the Suharto period, and his brother Hashim Djojohadikusumo is a outstanding businessman who additionally serves as considered one of his financial advisors.
Because of his background, Prabowo could also be prepared to take higher dangers in selecting who to go the MoF than Jokowi.
At the moment, there are two predominant camps of technocrats in Indonesia. The primary group consists of teachers reminiscent of Sri Mulyani, Chatib Basri, and Bambang Brojonegoro, who’re affiliated with the economics school on the College of Indonesia. Their experience lies in macroeconomic insurance policies, and they’re identified for his or her prudent administration of the state price range. Their educational credentials and macroeconomic policies have gained world recognition.
The second group consists of bankers reminiscent of Budi Gunadi Sadikin, Kartika Wirjoatmodjo, and Pahala Mansury. These people excel in asset discounting, finance, and microeconomics. They’re prudent however prepared to take dangers past the conservative requirements of latest years. Below Jokowi’s ten-year presidency, these bankers have gained a popularity as deal makers.
Amongst these technocrats, three names incessantly come up in discussions as potential candidates.
The primary is Budi Gunadi Sadikin. At the moment serving because the minister of well being, Budi is famend for his function in buying Freeport-McMoRan’s shares in its copper and gold mines in Papua in 2018, utilizing world bonds as an alternative of the state price range, a transfer that happy Jokowi. He additionally efficiently managed the COVID-19 disaster and carried out the Well being Regulation in 2023.
The second is Chatib Basri, a technocrat who served President Yudhoyono as minister of finance (2013-14) and Chairman of the Indonesia Funding Coordinating Board (2012-13). Chatib is seen as a intermediary; he’s prudent however not as conservative as Sri Mulyani, permitting room for negotiation and modern options. His good relationships with political stakeholders, academia, and the personal sector could be essential for price range negotiations.
The third identify is Kartika Wirjoatmodjo (Tiko). Like Budi, Tiko is a well known banker. He earned a popularity as an efficient supervisor throughout his tenure as CEO of Mandiri (2016-19) and because the vice minister of state-owned enterprises since 2019. As a banker, Tiko understands the monetary dynamics of huge enterprise teams in Indonesia. Because of this experience, there’s hypothesis that if Prabowo separates the Directorate Common of Taxes from the Finance Ministry, Tiko will be a candidate to head this new Tax Department.
Different names, reminiscent of Pahala Mansury, the present vice minister of overseas affairs, Mahendra Siregar, the chairman of the Monetary Providers Authority, and Ari Kuncoro, former dean of the College of Economics on the College of Indonesia, have additionally surfaced in latest weeks. The choice course of is dynamic, and extra names are more likely to seem earlier than the ultimate selection is introduced.
For the previous twenty years, the MoF and its longest-serving minister, Sri Mulyani, have completed a commendable job managing Indonesia’s macroeconomic insurance policies. Nevertheless, with a change in political management, there will likely be a necessity for a unique coverage strategy in Indonesia’s strongest ministry.
The Ministry of Finance’s energy and independence will stay intact – Prabowo is not going to danger undermining these throughout a interval of rocky world politics and low economic growth – however we’ll doubtless see a much less conservative determine than at any level for the reason that Asian Monetary Disaster.
