e call on President Prabowo Subianto to pay serious attention to the causes and possible implications of the steep fall of the rupiah against the greenback this week, as the market has seen it as a flashing red warning about his economic policies.
The currency’s drop was the worst since Indonesia’s 1998 financial and political crisis, which caused Prabowo’s former father-in-law Soeharto to end his 32-year dictatorship on May 21 of that year.
Adding to the country’s challenges, on March 18, the Indonesian stock market fell to its lowest level since 2021, triggering an emergency suspension of trading.
The President belittled the stock market’s tumble, saying his people were concerned about the prices of staple foods, not shares. But the roots of the two market reactions go much deeper than the President may think.
We do not intend to frighten the nation, but we have to convey it frankly because it is very clear that the government has been dismissive of the ongoing market reactions.
Economists say the rupiah’s fall is attributable to a mix of global uncertainty resulting from United States President Donald Trump’s tariff policies, geopolitical turmoil and the chaotic and impulsive economic policy of the Prabowo government.
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The recent revision of the Indonesian Military (TNI) Law has been seen domestically and internationally as part of a concerted effort to put more and more power in Prabowo’s hands. The authoritarian regime of Soeharto is haunting the nation again, and the President seems unable hide his preference for military generals in his government and his lack of trust in civilians.
Now, the Prabowo must acknowledge some bitter realities. He must be prepared to make a total correction, if necessary, to his economic policies and political approach. His “permanent” coalition, commanding 80 percent of the House of Representatives, may be rather more fickle than he imagines if the nation’s markets suffer much longer.
The government is now facing a serious crisis of trust from the people and financial markets, including foreign investors and countries.
Prabowo still has the opportunity to resolve the crisis to his advantage. But will he dare to launch a major cabinet reshuffle? He has promised to evaluate his cabinet after six months. April is the right time to prove his commitment.
Shortly after his inauguration in October of last year, Prabowo established a 109-strong team, consisting of 48 ministers, 56 deputy ministers and five heads of government bodies. It is a very big cabinet.
Seventeen of those ministers were reappointed from former president Joko “Jokowi” Widodo’s cabinet, including 12 to the same positions.
Despite the sheer quantity of manpower, the performance of Prabowo’s economic team has been disappointing. We call on the President to hire more professionals who have the courage to say no to their boss.
We also call on the President to stop or drastically reduce, at least temporarily, his free meals programs. Although it has a truly noble mission, it absorbs too many state resources at the cost of other, more strategic development goals.
When the Asian financial crisis hit in mid-1997, Soeharto was confident that Indonesia would be unaffected, as its economic fundamentals were solid.
This proved not to be the case, and United States President Bill Clinton decided to help salvage Indonesia, including through the International Monetary Fund and World Bank, because he believed the country was too important to US geopolitical interests to be allowed to fall.
Prabowo should remember that now, no foreign country will come to his government’s aid when a crisis hits, especially with Trump 2.0. Countries are now preoccupied with their own agendas and will not care about others, no matter how strategic their friends are on the world map.
The President must now take decisive action, including aborting his questionable economic programs. The crisis of confidence in his government can only be settled with more prudent economic policy. Prabowo should listen to the rupiah’s reprimand.
