For the Prabowo–Gibran government, the ousting of Sri Mulyani is a political gamble with high economic stakes.
On one hand, it clears the runway. With a more pliable finance minister in place, the administration now has greater room to deliver on big-ticket promises – social aid expansions, food subsidies, infrastructure blitzes – that captured public imagination during the election campaign.
But on the other hand, it comes at a cost: the perception, both at home and abroad, that Indonesia is willing to trade hard-earned fiscal credibility for short-term political capital.
The business community has already taken note. So have academics, technocrats, and international partners. Their concern isn’t ideological; it’s institutional.
Without a parallel plan to boost revenues or improve budget efficiency, ambitious spending could quickly outpace fiscal capacity, inviting macroeconomic stress and public disillusionment.
It’s a risk the markets were quick to price in.
Investors had long viewed Sri Mulyani as a guarantor of budget stability. Her cautious approach during times of turbulence – whether the 2008 financial crisis or the COVID-19 pandemic – helped shield Indonesia from the worst shocks. Her sudden removal rattled markets and cast fresh doubt on the country’s economic direction.
And yet, her departure also forces a reckoning: how much of Indonesia’s fiscal reputation was tied to one woman – and how much of it can survive without her?
Her time as finance minister over three administrations is a chronicle of influence.
Appointed in 2005 by President Susilo Bambang Yudhoyono, she quickly established herself as a rare breed: a finance minister as fluent in spreadsheets as she was in institutional reform. Her early tenure was marked by fiscal consolidation, tax reform, and an overhaul of public spending mechanisms that set the tone for a decade of macroeconomic stability.
From 2010 to 2016, she served as a managing director at the World Bank – a role that further cemented her global reputation as a credible steward of emerging market economies.
Her return in 2016, under President Joko Widodo, marked a continuation rather than a comeback. Over the next eight years, she steered the economy through a volatile global environment, including the pandemic shock of 2020. Despite the pressures, she kept deficits from ballooning, launched the Harmonisation of Tax Regulations Act (HPP) in 2021, and ensured fiscal policy remained anchored in realism.
In 2022, she hosted the G20 Finance Ministers’ Meeting in Bali, a crowning moment in her international engagement.
Under her watch, Indonesia’s 2024 state budget deficit was contained to 2.29 per cent of GDP, better than earlier estimates of 2.7 per cent, showing disciplined fiscal management.
And yet, by 2025, the fiscal anchor across three administrations – a figure who bridged political divides and brought a rare degree of continuity to economic policymaking – has been abruptly removed by President Prabowo, in what many see as the clearest break yet from the technocratic tradition that shaped post-reform Indonesia.
Yet, Sri Mulyani’s legacy is far from unblemished. She’s no stranger to public anger.
One of the most controversial episodes came with the 2008 Bank Century bailout, when the government poured in hundred of trillions of rupiah to shore up what was deemed a systemically vital bank. The move sparked uproar in parliament and beyond, with critics accusing her of siding with financial elites over ordinary citizens.
Her push for fiscal tightening and tax reform also carried political costs. While aimed at strengthening the state’s fiscal, many in the middle class and small business community felt the burden most keenly.
As a result, Sri Mulyani often became the lightning rod for frustration – blamed when prices rose, subsidies were cut, or tax breaks failed to trickle down.
The Fall of a Fiscal Hawk
Indonesia’s abrupt sacking of Finance Minister Sri Mulyani Indrawati marks a turning point in the nation’s political economy. A symbol of fiscal discipline for nearly two decades, her sudden replacement amid student and labour protests signals a clash between technocratic prudence and populist spending ambitions. The new administration faces a choice: honour Mulyani’s legacy of transparency and discipline or risk short-term political gains at the expense of long-term economic credibility.
“There are moments in a nation’s political economy that feel like turning points.
Indonesia President Prabowo Subianto’s sudden dismissal of Sri Mulyani Indrawati as finance minister is one of them of them.
This is no routine cabinet reshuffle – no mere bureaucratic shakeup.
It’s a symbolic and seismic event: the final bastion of Indonesia’s fiscal rationality has crumbled.
Sri Mulyani Indrawati was never just another minister. For nearly two decades, she was the symbol of Indonesia’s fiscal discipline – a rare voice of credibility and reason amid the noise of the country’s budget politics.
During the 2008 global financial crisis – as markets buckled and government scrambled – she stood firm and held the line, keeping Indonesia’s economy upright while others faltered.
Finance ministers in the US and Europe resorted to massive bailouts and stimulus packages, while some Asian neighbours, like Thailand, saw growth contract sharply. Indonesia, under Sri Mulyani’s leadership, still managed to post positive growth of 6 per cent in 2008 and 4.6 per cent in 2009, making it one of the few G20 economies to avoid recession.
Then came COVID-19. Faced with a once-in-a-century shock, she kept the fiscal engine running – channelling funds to social support, healthcare, and recovery – without allowing the debt curve to spiral out of control.
To many, she personified Indonesia’s technocratic ideal: competent, principled, and globally connected. Her brief tenure as a managing director at the World Bank only burnished that reputation.
For international investors, she wasn’t just another minister. She was the reason Indonesia’s economic story seemed credible.
With her at the finance ministry, the country felt a little safer. A little saner.
Now, with her exit, that sense of fiscal surety may have gone with her.
The reshuffle heard around the world
In politics, timing is everything. And this move couldn’t have come at a more combustible moment.
Sri Mulyani’s abrupt removal arrived as Indonesia faced a wave of public unrest: students rallying, labour unions marching, and widespread frustration over economic stagnation.
Inflation is eating away at household budgets. Job creation has stalled. Real wages are slipping. The disparity between the struggles of the layman and the privileges accorded to the elite have only grown starker.
And in the absence of clear answers, public anxiety turned into street-level fury.
Amid this fiery backdrop, the Prabowo administration made its move – not with structural reform or a new policy roadmap, but with a political gambit: removing the one figure widely seen as a constraint on unchecked spending.
That decision reverberated far beyond the steps of the State Palace.
Markets twitched and investors were spooked. And within Indonesia, a wave of debate erupted over what had just happened, and what might follow.
Was this the unavoidable end of a technocrat’s tenure? Or was it something deeper: a signal that economic policy would now be dictated less by data and discipline, and more by political survival?
And more importantly, where does the country go from here – economically, institutionally, and psychologically – now that its most trusted fiscal steward has been shown the door?
The financial uncertainty was just one aspect.
Many among the public are still struggling to understand why exactly the Prabowo-Gibran administration had chosen to push a respected and experienced force of calm out of her post.
It’s more than just a personnel change; it also signals a power shift.
For years, Sri Mulyani had acted as a counterweight, tempering grandiose spending plans with hard numbers and fiscal caution. Removing her clears the path for a more politically driven budget, less constrained by technocratic restraint.
There had long been whispers of tension between President Prabowo and Sri Mulyani. Over defence spending, subsidy policy, and her unwillingness to rubber-stamp expansive projects.
By ousting her, President Prabowo effectively signalled that economic management will be dictated not by fiscal calculation, but by political priorities.
Storm in a teacup
At the core of Sri Mulyani’s dismissal lie two overlapping dynamics: one fiscal, the other political.
First, the clash of fiscal philosophies. On one side stood Sri Mulyani, long known for her conservative, disciplined approach to state finances. On the other, the newly elected administration, riding a wave of populist ambition and eager to make good on big-ticket promises: subsidised meals, sprawling infrastructure, lofty growth targets, and a defence budget that continues to swell.
It was never going to be an easy match.
Second, the political temperature. August saw escalating protests led by students and workers, demanding relief from rising costs and questioning the government’s budget priorities.
For a new administration still settling in, the pressure was acute.
In this context, the removal of Sri Mulyani appears less like a policy transition and more like a pressure valve release, designed to send a message: the government is listening, and willing to act.
Yet the manner of her exit says just as much as the decision itself.
Reuters reported that Sri Mulyani was informed of her removal by phone, barely an hour before the official announcement.
It’s a telling detail: her ousting wasn’t part of a carefully engineered policy recalibration. It was a tactical move – made with political optics in mind.
Sri Mulyani herself had, by several accounts, grown weary of grind. Friend and colleague suggest she had considered stepping down even before the reshuffle, frustrated at being cast as the lone technocrat holding back a tide of populist spending.
Her departure, then, is not simply a dismissal, but the climax of a long-running tug-of-war between fiscal discipline and political ambition.
Into that vacuum steps Purbaya Yudhi Sadewa, a trusted economist with long-standing ties to Luhut, and an alignment with Prabowo’s inner circle.
Purbaya, formerly chief economist at Danareksa and a commissioner board leader at The Indonesian Deposit Insurance Corporation (LPS), has built a reputation as pragmatic and market-friendly, but notably more flexible on state-led spending than Sri Mulyani.
His appointment signals a pivot: away from technocratic guardrails, towards a finance team
A new Hand on the Purse Strings
While Purbaya Yudhi Sadewa hasn’t been a household name abroad, he’s a known quantity within Indonesia’s policy and corporate circles.
A graduate of the Bandung Institute of Technology (ITB) in Electrical Engineering, Purbaya went on to earn both a Master of Science and a PhD in Economics from Purdue University in the United States – credentials that cemented his reputation as an economist with a solid analytical foundation.
Before leading the LPS, he held a range of strategic government posts, including the Deputy for Maritime Affairs and investment (2018-2020) and Special Adviser on Economic Affairs at both the Coordinating Ministry for Maritime Affairs and the Coordinating Ministry for Political, Legal and Security Affairs, and Deputy III for Strategic Issues at the Presidential Staff office in 2015.
Beyond government, Purbaya has a long record in the capital markets sector.
Over the years, he has held key positions such as:
Purbaya has built a reputation for steady analysis and a pragmatic stance on markets.
Crucially, his appointment is as much about politics as economics. Purbaya is closely aligned with Luhut, the influential former minister and power broker, and has long been part of Prabowo’s economic orbit.
For investors, that pedigree signals a minister more attuned to the President’s expansive agenda than to technocratic orthodoxy.
That likely means a pivot away from tight fiscal restraint towards more state-led spending including infrastructure, food subsidies, and defence, with the expectation that markets will adjust to higher deficits so long as growth holds up.
His style contrasts with Sri Mulyani’s defensive posture: he is seen as more willing to accommodate political priorities and less inclined to draw hard lines against populist measures.
For investors, the message is twofold: fiscal discipline may loosen, but the new minister is unlikely to pursue abrupt or erratic changes. The bigger shift is one of emphasis and loyalty fiscal policy will now be shaped less by the Finance Ministry’s technocratic independence and more by Prabowo’s political imperatives.
Populism over prudence
Sri Mulyani’s dismissal exposed more than just a clash of personalities.
It underscored a deeper tension now pulling at the core of Indonesia’s economic governance: the uneasy balance between technocratic credibility and populist ambition.
To appoint one of the country’s most respected fiscal stewards – only to discard her midstream – sends an unmistakable signal. Investor confidence, it seems, is now being weighed against the political price of delivering expensive campaign promises.
And that balance may be tipping.
Replacing a finance minister known for her iron grip on spending with one more aligned with the administration’s expansive, pro-growth agenda suggests a shift in priorities – from fiscal restraint to rapid expansion, even at the risk of swelling deficits.
Economists have already raised red flags: this pivot could heighten investor anxiety and raise the country’s perceived risk profile.
Then there’s the political calculus. To remove such a key technocrat at the height of public unrest – amid protests, economic anxiety, and falling purchasing power – suggests a government reacting more to headlines than to underlying structural problems. Less deliberation, more damage control.
The fallout wasn’t confined to Jakarta’s corridors of power. International markets took notice – and took a step back. The rupiah dropped, stocks slid, and Bank Indonesia was forced into immediate intervention to calm volatility.
That market tremor reflected a deeper concern: if the fiscal anchor that Sri Mulyani provided is no longer in place, what will steady the ship now?
In effect, the Prabowo–Gibran administration has made its trade-off clear. Political capital at home now comes at the expense of macroeconomic credibility abroad.
The jitters set in
The economic consequences of Sri Mulyani’s exit were swift and far-reaching.
The initial market response was stark. The rupiah lost ground. The stock index fell. Central bank officials intervened to calm the currency and soothe investors. But the ripples ran deeper than price charts.
For years, global investors viewed Sri Mulyani as a safeguard – a steady hand who kept deficits in check and debt manageable. Her presence was a signal that, no matter the political noise, fiscal policy would be handled with discipline.
Now, that assurance is gone.
With her replacement, Purbaya Yudhi Sadewa, widely seen as more sympathetic to the administration’s expansive agenda, a shift in budget priorities is all but certain. More funding for social programs, bigger bets on infrastructure, and a looser fiscal stance aimed at fueling growth. But if revenues don’t keep pace, deficits will widen, and market pressure will grow.
In its place, analysts expect more political spending, and rising pressure on Bank Indonesia to support the agenda – perhaps with looser monetary policy.
That could unnerve investors further, unless the government outlines a clear, credible plan to contain risks.
There’s a historical caution here, too
Under Suharto’s New Order, Indonesia managed its debt, but behind closed doors – and at the cost of transparency. After the democratic transition, technocrats like Sri Mulyani built a new fiscal culture rooted in openness and institutional integrity.
Now, that hard-won legacy could be under threat.
Beyond the numbers, the reshuffle carries an institutional cost. Within the Ministry of Finance, an abrupt change in leadership can mean months of disorientation. Programmes stall. Direction blurs. Civil servants who spent years aligning with Sri Mulyani’s disciplined methods now face a potentially radical shift in style and substance.
Perhaps most damaging of all is the message sent internally: not even the most competent technocrats are safe from political winds. That knowledge alone could chill morale, weaken independence, and erode the culture of evidence-based policymaking that Sri Mulyani helped entrench.
And for a country at the cusp of a more complex economic future, that might be the costliest loss of all.
Credibility on the line
On one hand, it clears the runway. With a more pliable finance minister in place, the administration now has greater room to deliver on big-ticket promises – social aid expansions, food subsidies, infrastructure blitzes – that captured public imagination during the election campaign.
But on the other hand, it comes at a cost: the perception, both at home and abroad, that Indonesia is willing to trade hard-earned fiscal credibility for short-term political capital.
The business community has already taken note. So have academics, technocrats, and international partners. Their concern isn’t ideological; it’s institutional.
Without a parallel plan to boost revenues or improve budget efficiency, ambitious spending could quickly outpace fiscal capacity, inviting macroeconomic stress and public disillusionment.
It’s a risk the markets were quick to price in.
Investors had long viewed Sri Mulyani as a guarantor of budget stability. Her cautious approach during times of turbulence – whether the 2008 financial crisis or the COVID-19 pandemic – helped shield Indonesia from the worst shocks. Her sudden removal rattled markets and cast fresh doubt on the country’s economic direction.
And yet, her departure also forces a reckoning: how much of Indonesia’s fiscal reputation was tied to one woman – and how much of it can survive without her?
Her time as finance minister over three administrations is a chronicle of influence.
Appointed in 2005 by President Susilo Bambang Yudhoyono, she quickly established herself as a rare breed: a finance minister as fluent in spreadsheets as she was in institutional reform. Her early tenure was marked by fiscal consolidation, tax reform, and an overhaul of public spending mechanisms that set the tone for a decade of macroeconomic stability.
From 2010 to 2016, she served as a managing director at the World Bank – a role that further cemented her global reputation as a credible steward of emerging market economies.
Her return in 2016, under President Joko Widodo, marked a continuation rather than a comeback. Over the next eight years, she steered the economy through a volatile global environment, including the pandemic shock of 2020. Despite the pressures, she kept deficits from ballooning, launched the Harmonisation of Tax Regulations Act (HPP) in 2021, and ensured fiscal policy remained anchored in realism.
In 2022, she hosted the G20 Finance Ministers’ Meeting in Bali, a crowning moment in her international engagement.
Under her watch, Indonesia’s 2024 state budget deficit was contained to 2.29 per cent of GDP, better than earlier estimates of 2.7 per cent, showing disciplined fiscal management.
And yet, by 2025, the fiscal anchor across three administrations – a figure who bridged political divides and brought a rare degree of continuity to economic policymaking – has been abruptly removed by President Prabowo, in what many see as the clearest break yet from the technocratic tradition that shaped post-reform Indonesia.
Yet, Sri Mulyani’s legacy is far from unblemished. She’s no stranger to public anger.
One of the most controversial episodes came with the 2008 Bank Century bailout, when the government poured in hundred of trillions of rupiah to shore up what was deemed a systemically vital bank. The move sparked uproar in parliament and beyond, with critics accusing her of siding with financial elites over ordinary citizens.
Her push for fiscal tightening and tax reform also carried political costs. While aimed at strengthening the state’s fiscal, many in the middle class and small business community felt the burden most keenly.
As a result, Sri Mulyani often became the lightning rod for frustration – blamed when prices rose, subsidies were cut, or tax breaks failed to trickle down.
Spending under scrutiny
Sri Mulyani’s exit from the Finance Ministry is a macroeconomic stress test in real time.
On one side of the ledger are the risks: a downgrade in fiscal credibility, jittery markets, higher borrowing costs, and the potential erosion of policy coordination between the finance ministry and Bank Indonesia.
The swift reaction from financial markets – the sliding rupiah, the dip in equities – was less about panic and more about signalling. A trusted steward of Indonesia’s finances was gone, and investors were recalibrating accordingly.
For a government eager to supercharge growth through large-scale programmes, be it free lunches, infrastructure rollouts, or welfare expansion, the message was clear: ambition alone won’t cut it. Without a coherent financing strategy, credible tax reform, and transparent debt management, populist policies could easily trigger economic instability.
Yet the reshuffle also opens a window.
If done well – anchored by sound governance, measurable performance, and strict budget oversight – it could lead to a new era of development. But without those safeguards, big spending may become little more than a shortcut to deeper fiscal and political strain.
Fiscal crossroads
Her removal illustrates what happens when the guardrails of fiscal discipline collide with the imperatives of populist politics.
In this reshaped landscape, the budget is no longer just a planning tool; it risks becoming a political instrument, vulnerable to overreach and under-scrutiny.
That makes the role of her successor Purbaya pivotal. Labelled in some circles as having a “cowboyish” approach to economic policy, he inherits both a powerful institution and a weighty legacy. His leadership will shape whether the Finance Ministry maintains its credibility or becomes an instrument of unchecked expansion.
The reshuffle has come at a moment of heightened domestic pressure and uncertain global conditions. Inflationary risks persist, investor sentiment is fragile, and Indonesia’s medium-term development goals demand clarity and consistency in fiscal governance.
Sri Mulyani’s legacy – of tax reform, governance standards, and global respect – won’t vanish overnight. But it isn’t self-sustaining either. It requires active protection, institutional strength, and, crucially, political will.
This reshuffle may be remembered not just as the end of an era, but as a defining fork in the road for Indonesia’s economic future.
If carefully managed, Sri Mulyani’s departure could mark the beginning of a new chapter: one in which the Prabowo–Gibran administration delivers on its promises without jeopardising long-term fiscal health. Bold reform is possible – but only if underpinned by accountability, transparency, and a disciplined fiscal framework.
If mismanaged, however, it could usher in a period of economic volatility, waning investor trust, and institutional backsliding, where populist politics crowd out prudent policymaking.
The stakes are clear. So is the choice.
The next phase of Indonesia’s political economy will hinge not just on who controls the budget, but on how they choose to wield it.
Hot off the press
From village life on the banks of the Sarawak River to shaping national policy in Putrajaya, Dato’ Sri Nancy Shukri has led with quiet strength, deep cultural grounding, and an unwavering commitment to public service. As Malaysia’s Minister of Women, Family and Community Development, she’s championed women’s empowerment, youth opportunity, and inclusive leadership.
In our Jun/Jul 2025 issue, MillionaireAsia puts the spotlight on this East Malaysian trailblazer who’s redefined what it means to lead with purpose. We follow Nancy’s journey from a childhood shaped by strong female role models to a career in politics that continues to break barriers and uplift communities.
We also continue our mission to spotlight the women shaping Southeast Asia’s future – with stories, programmes, and partnerships designed to empower, inspire, and ignite change.
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