Jakarta – The appointment of Purbaya Yudhi Sadewa as Finance Minister replacing Sri Mulyani Indrawati marks a new chapter in Indonesia's fiscal politics. Instead of bringing optimism, he gives rise to concerns about the direction of the management of state finances.

From the outset, Purbaya has expressed his confidence that the Indonesian economy will achieve growth of 7 to 8 percent, Prabowo Subianto's target since his election campaign. Optimism is necessary, but if it is not based on realistic calculations, this kind of promise will only serve as a way of keeping the President happy.

More worrying is that Purbaya is relying on accelerated government spending as the main driver of growth. The father of modern economics, John Maynard Keynes, did emphasize the role of state spending during an economic downturn. But Keynes also warned that spending was only effective if it was properly targeted and there was momentum. Done arbitrarily, it will only lead to waste. Classic fiscal theory even emphasizes the risk of crowding out: overly expansive government spending actually puts pressure on the private sector, pushing up interest rates and inflation, and reducing investment.

In April 2025, came a warning from the International Monetary Fund: Indonesia is burdened with huge debts as a result of massive infrastructure investment in the past without matching institutional and productivity reforms. As a result, short-term economic growth is just an illusion. Debts are piling up, projects are not productive and the fiscal burden is soaring. If the deficit rules are relaxed, the markets will lose trust, the rupiah will come under severe pressure and the cost of servicing debts will rise sharply. And instead of high growth, there could be stagnation or a fiscal crisis.

The experience of the Sri Mulyani era must serve as a lesson. Excessive state spending on ambitious projects led to a budget deficit. Tax revenues were increased through policies that resulted in disruption, but this was not enough to close the funding gap.

Now Prabowo's two flagship programs are draining state finances: the free nutritious meals and red-and-white village cooperatives. It is claimed that both of these will drive growth, but their implementation is still chaotic and the results unproven. Funding for the free nutritious meal program will almost double from Rp171 trillion in 2025 to Rp335 trillion in 2026, or almost half of the Rp757 trillion total education budget.

The village cooperative program is no less problematic. Purbaya even plans to withdraw Rp200 trillion of government funds from Bank Indonesia, some of which will be paid through state-owned banks to village cooperatives. With weak oversight mechanisms, this policy will be highly prone to bad debts and mass corruption.

These measures show that Purbaya is more loyal to orders from the President than fiscal discipline. He appears to be implementing Prabowo's style of "command economics," assuming that the state is the main driver of growth and that the people are simply recipients. Targets on paper are considered as being achievable through orders. A number of programs have been implemented with the mission of keeping the President happy, without adequate calculations or close oversight.

At a time when the state is struggling financially, Indonesia needs a Finance Minister who will act as a brake, not a gas pedal for financial ambitions; a guardian of fiscal sanity, not an interpreter of populist policies.

– Read the complete story in Tempo English Magazine

Source: https://en.tempo.co/read/2050006/the-command-economics-of-the-new-finance-ministe