Alfida Rizky Febrianna, Jakarta – As Prabowo Subianto prepares to assume the presidency next month, he faces a critical decision in selecting a finance minister, a position crucial to steering Indonesia out of its persistent middle-income trap, analysts said on Monday.

The current finance minister, Sri Mulyani Indrawati, is widely regarded for her prudence and professionalism in managing the state budget, earning her the opportunity to serve under two consecutive presidents.

However, Indonesia continues to grapple with rising foreign debt and a declining tax-to-GDP ratio, according to Esther Sri Astuti of the Institute for Development of Economics and Finance (INDEF).

"Our biggest challenge is to break free from the middle-income trap, particularly as neighboring countries like Vietnam have made better progress in this area," Esther said.

She added, "There is a fiscal problem within the Finance Ministry, with foreign debt having surged by 3.3 times over the past decade, while our tax ratio has dropped to just 9-10 percent."

In the first quarter of the year, Indonesia's foreign debt stood at $403.9 billion, down slightly from $408.5 billion in the fourth quarter of 2023, according to central bank data.

Prabowo will need to appoint a finance minister who is not only highly competent and professional but also independent enough to challenge or reject policies that could place further strain on the national budget, she noted.

Yusuf Rendy Manilet, an economist from the Center of Reform on Economics (CORE), echoed Esther's concerns, stressing that the next finance minister must be guided by data and evidence.

"Every government policy or program must be firmly backed by data, not assumptions," Yusuf said.

He added that the role of the finance minister extends far beyond bureaucratic duties, requiring a deep understanding of good governance and macroeconomic principles.

Yusuf also underlined the importance of appointing a finance minister with an unblemished criminal record.

Source: https://jakartaglobe.id/business/prabowos-finance-minister-pick-will-face-formidable-challenges-ahea