Indonesia’s newly appointed Finance Minister, Purbaya Yudhi Sadewa, has stated that he will maintain the country’s existing fiscal restraints until it can be demonstrated that South-East Asia’s largest economy can achieve faster growth through more efficient spending. In an interview with Bloomberg, Purbaya emphasised the importance of maintaining fiscal guardrails to reassure investors while simultaneously working to boost economic expansion. Indonesia has a $US1 trillion economy. The finance ministry oversees government finances, budget, and economic policies.
Purbaya indicated that there is currently “no point” in widening the budget deficit if the government cannot spend effectively. He suggested that loosening the 3 per cent deficit-to-GDP cap, a key element of fiscal policy since the Asian financial crisis of the late 1990s, could be considered once spending efficiency improves. However, he stressed that there are no immediate plans to do so. Purbaya’s appointment in early September occurred as President Prabowo Subianto aims to increase economic growth, while addressing a weakening currency, rising living costs, and growing inequality.
The recent cabinet reshuffle, which followed significant protests, has heightened investor scrutiny regarding a potential relaxation of fiscal rules that have supported Indonesia’s stability for over two decades. Purbaya’s initial actions, including directing US$12 billion of government funds into banks to encourage lending, along with surprise interest rate cuts by Bank Indonesia, have concerned some investors who fear a coordinated fiscal-monetary shift.
Despite pressures to stimulate growth, the Finance Minister’s stance signals a commitment to fiscal discipline. This approach aims to build investor confidence while the government seeks more effective ways to utilise existing resources and boost the nation’s economic performance.
