Purbaya Yudhi Sadewa stresses efficiency over spending as Prabowo seeks bold growth targets
Indonesia’s new finance minister has ruled out loosening long-standing fiscal restraints until the economy proves it can grow faster through more efficient spending, signaling continuity in discipline despite pressure for expansion.
Fiscal Guardrails to Stay in Place
Purbaya Yudhi Sadewa, who became finance minister in September 2024, said Indonesia’s US$1.3 trillion economy will maintain its fiscal guardrails — including the 3% deficit-to-GDP cap — until stronger growth is achieved. “When we have grown faster, then we will see what is right for us,” he told Bloomberg Technoz on September 30.
Efficiency First, Not Expansion
Calling current restrictions both prudent and reassuring to investors, Purbaya stressed that widening the deficit would be pointless without efficient spending. “It’s not ‘spend, baby, spend’ but ‘efficiency, baby, efficiency,’” he remarked. Loosening limits, he said, would only be acceptable once public expenditure delivers clear economic gains.
Balancing Growth and Investor Confidence
Purbaya’s appointment followed Indonesia’s most violent protests in years, which raised concerns about inequality and rising living costs. His cautious stance is meant to reassure investors who have long seen fiscal rules as anchors of stability since the late 1990s Asian financial crisis. Still, his early steps — including channeling US$12 billion into banks to boost lending and Bank Indonesia’s surprise rate cuts — have sparked concerns of tighter fiscal-monetary coordination.
Central Bank Independence Questioned
The minister, a known admirer of Milton Friedman, downplayed fears of central bank compromise. He said Bank Indonesia remains committed to its legal mandate and emphasized that the new “burden sharing” arrangement, where the central bank helps fund government programs, must remain temporary to avoid perceptions of debt monetization.
Boosting Revenue Through Reform
To reduce reliance on central bank support, Purbaya outlined plans for stronger tax collection and customs reform, which he believes could significantly increase state revenue. These measures, combined with efficiency gains, could accelerate growth to 6% in the near term, compared with the 5% average over the past decade.
Path to Higher Growth Targets
President Prabowo Subianto’s ambition of 8% growth, last achieved in the mid-1990s, will require stronger private investment. Purbaya said there are no extraordinary policies planned, but clearing bureaucratic bottlenecks that stall investment proposals from neighboring countries could help unlock opportunities.
Indonesia’s renewed emphasis on fiscal discipline underscores the government’s effort to balance stability with growth ambitions. For regional investors and neighboring economies like Singapore, the stance signals a cautious but steady policy path — one that prioritizes long-term credibility while gradually laying the groundwork for faster expansion.
Sources: The Business Times (2025) , Bloomberg.com (2025)
Keywords: Indonesia Economy, Fiscal Policy, Budget Deficit, Debt Ratio, Economic Growth, Purbaya Yudhi Sadewa
