The Tamesis
February 2, 2026
jakarta – The country’s economy has endured a tumultuous few weeks. The appointment of President Prabowo Subianto’s nephew Thomas Djiwandono as deputy governor of Bank Indonesia (BI) immediately triggered market turmoil. Concerns about the central bank’s independence heightened investor anxiety and added to pressure on the rupee.
Confidence further deteriorated after global index provider Morgan Stanley Capital International (MSCI) flagged shareholding transparency flaws and allegations of coordinated trading at the Indonesia Stock Exchange (IDX). MSCI has suspended tracking the IDX and called for major reforms, warning that failure to comply could lead to a downgrade in Indonesia’s market position and trigger more capital outflows.
The government continues to insist that Indonesia’s economic fundamentals remain strong. But structural vulnerabilities remain evident. In the context of market volatility, even a single external or domestic shock can have a disproportionate impact.
This is why Prabowo’s government should avoid complacency and resist politically expedient responses to complex economic issues. Slowing growth and a depreciating rupee do warrant a rethink of fiscal and monetary strategies. Amid heightened global uncertainty, including lower commodity prices and a stronger U.S. dollar, less conservative policies may be needed. However, any shift must be carefully calibrated and institutionally sound.
Indonesia has benefited from the post-COVID-19 commodities boom, which boosted exports and accelerated recovery. That tailwind has receded. Government revenue fell last year, forcing borrowing to increase and the budget deficit to approach the legal limit of 3% of gross domestic product.
Expanded government spending failed to achieve growth targets. Finance Minister Purbaya Yudhi Sadewa’s plan to inject Rp 200 trillion ($11.9 billion) into the banking system has received a lukewarm response, forcing the government to withdraw Rp 75 trillion for other positions in the national budget.
The less successful capital injection shows that the current economic problem is not liquidity, but the investment and consumption risk perception of companies facing policy instability and stagnant domestic demand.
Against this backdrop, Prabowo’s decision to appoint Thomas, currently deputy finance minister, to the RBI board appears to be aimed at encouraging a looser monetary stance to support economic growth. During his confirmation hearing in the House of Representatives, Thomas emphasized the “synergy” of fiscal and monetary measures to increase liquidity and growth, suggesting that the central bank may stray away from its focus on inflation control and monetary stability.
Closer coordination between Bank Indonesia and the Finance Ministry may sound sensible, but as Purbaja’s policy practice shows, the relationship between fiscal stimulus, credit demand and confidence is far from linear. Borrowing costs aside, households and businesses remain cautious about income prospects and investment opportunities.
Interest rate cuts by Bank Indonesia may support growth to some extent, but Indonesia remains highly vulnerable to external shocks, as evidenced by the recent stock market crash. Aggressive easing could lead to higher inflation and renewed pressure on the rupee, but there is no guarantee of accelerating economic growth. If growth disappoints and revenue remains weak, the government will not be able to avoid borrowing more, repeating last year’s pattern.
Current economic challenges require capable people in governments and central banks. They may require policy innovation rather than adjustments motivated by political considerations. This lends credence to the perception that the president’s interference was familial rather than technocratic, which is deeply troubling.
Thomas did not lead major policy breakthroughs during his tenure at Treasury. His role is primarily oversight, ensuring senior ministers are aligned with the president’s agenda. A similar dynamic may play out with BI, whose presence only reinforces his uncle’s preferences.
Such arrangements may serve short-term political goals but risk damaging institutional credibility. Economic decision-making benefits from internal debate and technical dissent rather than becoming an echo chamber.
Purbaia’s pro-growth strategy has merit, but it may need refinement. It needs a currency counterparty that can pose a constructive challenge. Bank Indonesia Governor Perry Wardjiyo’s conservative approach has also helped stabilize inflation and limit currency volatility, achievements that should not be dismissed lightly. A compromise between the two could lead to better economic policies.
Effective leadership depends on accepting rigorous policy choices. At a time when credibility matters most, Indonesia cannot afford governance choices that undermine confidence.
