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View all search resultsMoody’s flags fiscal risks after shift in finance chief
While the new finance minister has promised not to make any major changes to next year's draft budget and instead focus on fiscal discipline, Sri Mulyani's departure has left markets nervous about her replacement's policy direction.
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A clerk poses with rupiah banknotes at a money changer in Jakarta on May 2, 2024. (AFP/Adek Berry)
M
oody’s Ratings has warned that Indonesia’s credit outlook could weaken if Monday’s cabinet reshuffle led to a departure from fiscal prudence, raising concerns about the country’s future economic policy direction.
“The recent changes within Indonesia’s government would be credit negative if they correspond to a shift away from long-standing fiscal policy prudence,” Christian de Guzman, senior vice president at the major credit rating agency, said in a statement on Wednesday.
De Guzman added that policy uncertainty could trigger capital outflows, putting additional pressure on the rupiah and government bonds.
“The next few weeks are likely to be characterized by further volatility in capital flows and the exchange rate, complicating Bank Indonesia’s monetary policy task of ensuring stability,” he said.
In March, Moody’s reaffirmed Indonesia’s sovereign debt rating at “Baa2” with a stable outlook, a level that has been maintained since April 2018.
The rating agency’s warning comes two days after President Prabowo Subianto reshuffled his cabinet on Sept. 8, marked by the departure of Finance Minister Sri Mulyani Indrawati and her replacement by economist Purbaya Yudhi Sadewa, who previously headed the Deposit Insurance Corporation (LPS).
Long regarded as a steward of fiscal discipline, Sri Mulyani has been credited with keeping budget deficits within target despite rising welfare spending and delays in revenue reforms during her leadership of the Finance Ministry for more than a decade.
