On September 14, 2026, Finance Minister Suahasir Nazara gives a speech after taking office as Minister of Finance at the Ministry of Finance in Jakarta.
Faisal Ramadan | Nur Photo | Getty Images
Indonesia has just appointed its third finance minister in two years, bringing into focus concerns plaguing Southeast Asia’s biggest economy, with analysts pointing to the need for fiscal prudence and a shift away from “interventionist” policies.
President Prabowo Subianto on Monday dismissed Finance Minister Purbaya Yudi Sadewa and replaced him with Vice President Suahashiru Nazara.
The appointment comes weeks after Bank Indonesia Governor Perry Warjiyo suddenly resigned, sparking increased scrutiny over how much control Prabowo now has over fiscal and monetary policy.
For investors, the elevation of a prominent technocrat could restore confidence after a difficult year under Purbaya, which saw credit rating outlooks downgraded and the currency plunged to historic lows this year.
Nazara, who was sworn in hours after Purbaya’s ouster, served as deputy finance minister for seven years and led the ministry’s fiscal policy department from 2015 to 2019.
“He is a well-known technocrat with deep experience in the Ministry of Finance and strong ties to the Sri Mulyani era,” said Chee Hung Tai, senior Asia analyst at the Economist Intelligence Unit. Mr Tay said his in-house pedigree “reduced transition risk” as he already understood how the budget worked.
Gareth Leather, senior Asia economist at Capital Economics, said it was a “welcome development”, although more evidence of improved policymaking was needed before concluding that Indonesia had “truly turned the corner”.
Indonesia’s economy has been squeezed this year by the Iran war-driven energy crisis and increasing fiscal constraints. Subsidy costs have skyrocketed due to rising energy costs, forcing cuts to major flagship programs. The market reaction was poor, with the benchmark index down more than 25% since the start of the year and the currency hitting an all-time low in June.
However, the subsequent shift towards fiscal discipline helped stabilize sentiment over the past month.
The rupiah strengthened, reaching 17,680 rupiah to the dollar on Wednesday. Radhika Rao, an economist at DBS Bank, expects the currency to trade in the 17,600-17,800 range in the near term as fiscal confidence supports bond markets and boosts the currency.
The country’s budget deficit is expected to widen to 2.85% of GDP in 2026, and Purbaya’s one-year term is marked by cuts to credit outlooks by Fitch and Moody’s due to policy uncertainty, even as the country’s growth rate reaches its highest level in three years.
“The new finance minister needs to have clearer priorities and provide investors with a more consistent signal on fiscal policy,” Leather said. “Early signs are encouraging,” Nazara said in his first remarks as minister, pledging to protect the integrity of the budget and keep the budget deficit below 3% of gross domestic product.
“The key constraint is that Nazara will have to finance Prabowo’s expensive growth plans with increasingly limited fiscal space,” Tay said, adding that he expected less expansionary fiscal policy and a more conciliatory relationship with Bank Indonesia.
A shift away from “interventionist policy-making”
Reza said the appointment follows a series of developments that suggest Indonesia may be gradually moving away from “the more populist and interventionist policymaking that has been characteristic of President Prabowo to date.”
But not everyone sees the appointment as encouraging, as the leadership change comes amid growing concerns about the central bank’s autonomy.
Prabowo’s nephew, Thomas Ziwandono, was appointed deputy governor in February, months before Warujiyo resigned in July. On September 1, parliament elected Senior Vice President Destri Damayanti as the first female president of Bank Indonesia.
Joshua Kurlanczyk, a senior fellow at the Council on Foreign Relations, called Nazara’s promotion “a further worrying sign of increasing economic power in Prabowo’s hands,” highlighting concerns about Bank Indonesia’s independence.
EIU’s Tay said the 2027 budget will provide an early clue as to whether Nazara can bring about a shift in policymaking, based on decisions on spending, revenue assumptions and deficits.
On the financial front, Tay said a clearer separation between fiscal policy and the central bank would be another important signal, especially if the government were to stop relying on Bank Indonesia to support growth and absorb more financial burdens.
Mr Tay said Nazara will be tested on whether to cut or delay programs that have so far failed to achieve rapid economic speed relative to cost. “If we do that while preserving fiscal confidence, it will represent a real transformation,” he said. “But if spending ambitions remain the same and adjustments are largely rhetorical, it will be more like business as usual.”
