Indonesia Brings Back Veteran Indrawati as Finance Minister

  • She helped steer nation through global financial crisis
  • Appointment helps Jokowi ‘consolidate his grip’ on agenda

Indonesian President Joko Widodo picked Sri Mulyani Indrawati as his new finance minister, returning her to a post she held six years ago in which she built up a reputation as a tough technocrat and reformer.

Indrawati, 53, will replace Bambang Brodjonegoro in the second cabinet reshuffle since the president -- known as Jokowi -- took office just under two years ago. It signals his commitment to push through an ambitious infrastructure program to transform Southeast Asia’s largest economy, and meet a pledge of boosting growth to 7 percent.

During her term as finance minister between 2005 and 2010, Indrawati steered the economy through the global financial crisis, helped to spur investment and curbed inflation. But her tenure was marred by an opposition campaign accusing her and then-Vice President Boediono of abusing their authority. She resigned in 2010 to join the World Bank as one of three managing directors.

‘Dream Team’

Along with Indrawati, Jokowi also strengthened his political foundations by appointing new allies to his cabinet, bolstering investor sentiment.

“The thoughtfully choreographed reshuffle should further cheer the market,” said Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore. “A ‘dream team’ will not be too much of an exaggeration.”

The Jakarta Composite Index gained as much as 1.5 percent after the news of Indrawati’s appointment, and was 1 percent higher at 5,277.2 as of 3.10 p.m. local time. The rupiah rose 0.3 percent to 13,131 against the dollar, taking its gain this year to 4.9 percent.

Indrawati, who has a PhD degree in economics from the University of Illinois, faces the challenge of boosting growth while keeping the budget deficit under control. Under Brodjonegoro, the country missed its growth and tax revenue targets last year as falling commodity prices curbed revenue from exports such as oil and rubber. The government is forecasting a budget deficit of 2.35 percent of gross domestic product for this year.

Exports have remained weak this year and the central bank said last week it’s likely there will be limited improvement to the economy in the second quarter after it grew at a slower pace of 4.9 percent in the first three months. Bank Indonesia is forecasting growth of 5 percent to 5.4 percent in 2016.

“I will dedicate all my efforts to accelerating Indonesia’s development agenda with the goal of providing more and better services, particularly to the poor, and ensuring that all citizens will be able to participate in the benefits of a thriving economy,” Indrawati said in a statement on Linked-in.

Power Base

Jokowi has in recent months consolidated power in parliament after Golkar, the nation’s second-largest political party, backed his government. With a two-thirds majority, Jokowi has been able to push through changes including a tax amnesty aimed at repatriating billions of dollars that the government plans to use for infrastructure.

“In the last two years of our administration, we have faced hard challenges,” the president told reporters in Jakarta. “We need to solve the problem of poverty, we need to reduce economic equality between the rich and the poor as well as gaps between regions.”

The new cabinet was motivated by a need to respond to economic challenges more quickly and effectively, he said.

Confidence Boost

Getting Indrawati to leave the World Bank and join his team was a coup for Jokowi and bolsters market confidence, said Indra Mawira, an investment manager at Panin Asset Management.

“Today’s reshuffle, and the appointment of the new police chief earlier this month, clearly showed that Jokowi has been able to consolidate the political power toward him and investors have and will continue to take this positively,” he said by phone from Jakarta.

Brodjonegoro was named as national planning minister and Wiranto, a former defense minister and commander of the Indonesian military, was appointed coordinating minister for security affairs. Other appointments include:

  • Luhut Panjaitan as coordinating minister for maritime affairs
  • Budi Karya Sumadi as transport minister
  • Enggartiasto Lukita as trade minister
  • Airlangga Hartarto as industry minister
  • Archandra Tahar as energy and mineral resources minister

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