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Analysis: Rumors of finance minister's departure dampen rupiah value
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Speaker of the House of Representatives Puan Maharani (left) and Finance Minister Sri Mulyani Indrawati (right) share a light moment before their meeting on Jan. 25, 2024. (The Jakarta Post/Instagram)
R
umors that Finance Minister Sri Mulyani will resign from President Joko “Jokowi” Widodo's cabinet have emerged just weeks before the 2024 general election. Despite denials from President Joko "Jokowi" Widodo and several ministers, speculation about Sri Mulyani's departure has weakened the rupiah and led to significant divestment by foreign investors from Indonesian government securities.
The first suggestion that the finance minister intended to resign was from Faisal Basri, a senior economist at the University of Indonesia, who said in mid-January that Sri Mulyani, along with Public Works and Housing Minister Basuki Hadimuljono and Energy and Mineral Resources Minister Arifin Tasrif, would tender her resignation. Additionally, a tweet by Finance Ministry special staffer Yustianus Prastowo on social media platform X, reinforced these rumors. In his tweet, Yustinus expressed a desire to follow his superior, Sri Mulyani, in leaving the Finance Ministry.
A dispute with Defense Minister Prabowo Subianto over defense spending is believed to be a catalyst for Sri Mulyani's rumored resignation plan. The problem is that Prabowo, as a presidential candidate, enjoys the full backing of President Jokowi. What makes Sri Mulyani want to leave the cabinet, according to some sources, is her indignation over President Jokowi helping his son Gibran Rakabuming Raka be named Prabowo’s vice presidential candidate and his decision to increase the social assistance budget amid the presidential election.
The Finance Ministry reportedly refused to approve the Defense Ministry's plan to purchase 12 used Mirage 2000-5 aircraft, citing the country's fiscal limitations. This contract, worth 733 million Euros (approximately Rp 12.4 trillion), for 12 used jets from the Qatar Air Force was signed in January 2023 by the Defense Ministry and Czechoslovak Group, a Czech Republic-based defense company. The acquisition faced criticism from some politicians because of the planes’ age and potential maintenance costs. However, in November 2023, President Jokowi approved a 20 percent increase in the defense budget for 2020-2024, from the originally planned US$20.75 billion to US$25 billion, financed through foreign loans.
Another presumed reason is President Jokowi's decision to provide the El Niño social aid program, which has been accused of being overly burdensome for the state budget. The 2023 social aid budget, initially set at Rp 146.47 trillion, swelled to Rp 159.6 trillion in realization and is pegged at Rp 157.3 trillion for 2024.
Many see such an increase in social spending being misused for political purposes, particularly in boosting Jokowi’s popularity and his support for the Prabowo-Gibran ticket.
Sri Mulyani has been reticent when asked about the resignation rumors, stating she is still working as minister. Meanwhile, President Jokowi and Coordinating Economic Affairs Minister Airlangga Hartanto have denied rumors of the planned resignations of several ministers, including Sri Mulyani.
