Indonesia’s President Prabowo Subianto has reshuffled his cabinet following two weeks of at times violent protests, removing a number of ministers, including highly-regarded Finance Sri Mulyani Indrawati.
In a press conference yesterday, State Secretary Minister Prasetyo Hadi announced changes to five ministries. “Based on various considerations, input, and continuous evaluations, the president this afternoon decided to reshuffle several ministerial positions in the Red and White Cabinet,” he stated, as per the state news agency Antara.
The new ministers were sworn in at a ceremony at the Presidential Palace in Central Jakarta, which was broadcast live on national television channels and official social media platforms.
The changes come after two weeks of protests focused on economic inequalities and police brutality, which flared into violent riots after the police killing of a motorcycle taxi driver during a protest close to the parliament complex in Jakarta.
Among the cabinet changes were the appointment of Mukhtarudin, a former Golkar lawmaker from the House of Representatives, as the minister of migrant workers protection, replacing Abdul Kadir Karding of the National Awakening Party. At the Ministry of Cooperatives, Budi Arie Setiadi was replaced as minister by his deputy, Ferry Juliantono.
Prabowo dismissed Budi Gunawan as coordinating politics and security minister and Dito Ariotedjo from his post as youth and sports minister, although their replacements have yet to be named. Prabowo also announced a minister and deputy to the newly established Ministry of Hajj and Umrah, which will help support Indonesian Muslims wishing to undertake a pilgrimage to Mecca.
By far the most significant change to the cabinet was the departure of Sri Mulyani Indrawati, one of the longest-serving finance ministers in Indonesian history. Initially appointed by President Susilo Bambang Yudhoyono in 2005, Sri Mulyani served in the role for a total of 13 years across three presidential administrations. During this time, she earned considerable respect in international circles, particularly for her reforms of the chaotic Indonesian taxation system and for her role in steering Indonesia through the global financial crisis and the COVID-19 pandemic. Among her other career highlights are stints as the executive director of the International Monetary Fund and managing director of the World Bank.
Prior to taking office in October of last year, Prabowo made the unexpected decision to retain Sri Mulyani in his Cabinet, hoping that her reputation as a conservative, cautious economic manager would calm international markets unsettled by his ambitious spending plans. These have included an increase in defense spending, hikes in civil servants’ salaries, and a $28 billion program to give 83 million children and pregnant women free meals. Prabowo also set an ambitious goal of increasing annual economic growth to 8 percent by the end of his five-year term.
All of this has required tax hikes and a broad fiscal belt-tightening that arguably intensified the economic grievances that exploded into the streets at the end of last month. (The trigger for the protests was a lavish new housing allowance for lawmakers, but they soon expanded into an angry indictment of the country’s entire political and economic order.)
The reasons for Sri Mulyani’s removal are unclear, although rumors of her resignation have swirled since a home of hers in Jakarta was ransacked during last week’s protests. However, the most likely reason for the dissonance between Sri Mulyani’s fiscal conservatism and Prabowo’s ambitious spending plans, particularly his free meal plan, to which she responded by making significant cuts to state expenditures in other areas.
Asked about her departure during his press conference, Prasetyo Hadi said she “neither resigned nor was she removed,” Reuters reported. “The president, as head of state and government… has a prerogative,” he added. “And after some evaluation, he decided on a formation change.”
Sri Mulyani’s replacement is Purbaya Yudhi Sadewa, an economist who heads the state-owned Indonesia Deposit Insurance Corporation, and has served in a number of other ministries, including the Coordinating Ministry for Maritime and Investment Affairs. Speaking to reporters after being sworn in, Purbaya said that the president’s target of 8 percent economic growth was “not impossible” and that he would find ways to boost the economy.
All of this is easier said than done, however. Among seven financial analysts who gave their opinion of the change to Reuters, all focused on the unexpected nature of Sri Mulyani’s removal, and the likelihood that her successor would prevail over a less conservative and more unpredictable fiscal policy – and be less willing or able to say “no” to the president.
“Mulyani was the safeguard of prudent fiscal policy,” Hasnain Malik, an economic analyst for Tellimer in Dubai, told the news agency. “Therefore, her departure will stir up fears of widening deficits under an unconstrained and, after the protests, under-pressure Prabowo.”