JAKARTA, 9 September 2025 — The unexpected dismissal of Finance Minister Sri Mulyani Indrawati has rattled markets and raised serious concerns about Indonesia’s fiscal future under President Prabowo Subianto. Sri Mulyani — widely respected for her role in restoring fiscal discipline and tax system reforms — was replaced by economist Purbaya Yudhi Sadewa, who has promised a faster economic growth model, despite investors warning that her departure could undermine long-term stability.
Financial markets reacted swiftly and sharply: Indonesian stock indices dropped 1%, international bond prices softened, and the rupiah opened lower amid mounting uncertainty.
Analysts emphasized that Sri Mulyani had long served as the guardian of prudent economic management. “Her departure will stir up fears of widening deficits under an unconstrained and, after the protests, under-pressure Prabowo,” noted Hasnain Malik, strategist at Tellimer.
Retail economists echoed these fears. Trinh Nguyen of Natixis posed the market’s central concern: “To afford the 1.5% of GDP lunch program and enhance defense spending, how will the new finance minister avoid punching a larger hole in the deficit?”
Moreover, Jason Tuvey of Capital Economics warned that Sri Mulyani’s exit could invite fiscal rule erosion and increased pressure on Indonesia’s central bank.
The backdrop to this change includes two weeks of widespread protests over economic hardship and lawmakers’ lavish perks, swelling into unrest that has deeply rattled the political leadership.
Purbaya, formerly head of the Indonesia Deposit Insurance Corp, accepted his new role by emphasizing the need to reignite economic momentum. He described the president’s 8% growth target as “not impossible,” urging an increased partnership with both private and public sectors.
Despite pledges to uphold balanced policy, market confidence remains fragile. With foreign reserves declining slightly and uncertainties rising around budget execution, investors are closely watching whether the new fiscal leadership can maintain stability — especially as Prabowo’s “free school meals” program and elevated defense spending loom large.
