Economic policy has once again come into focus following President Prabowo Subianto’s cabinet reshuffle at the State Palace on Monday (Sep. 8). In the reshuffle, Purbaya Yudhi Sadewa officially replaced Sri Mulyani as Indonesia’s Minister of Finance for the 2025–2029 term. During a meeting with the House of Representatives (DPR), Minister Purbaya emphasized his plan to withdraw Rp200 trillion from Bank Indonesia to maintain liquidity and stimulate the real sector.
Responding to this statement, Dr. Denni Puspa Purbasari, an economist from Universitas Gadjah Mada (UGM), assessed that the minister’s proposed policy places greater emphasis on economic growth and job creation.
She explained that this approach is essentially aimed at achieving internal balance, one way being to increase liquidity or the supply of cash in the economy.
However, Dr. Purbasari cautioned that higher liquidity and lower interest rates could lead investors to perceive Indonesia as less attractive for investment.
“As a result, capital could flow abroad, which would trigger Rupiah depreciation against foreign currencies,” she said on Thursday (Sep. 11) at the Faculty of Economics and Business (FEB UGM).
From an economic standpoint, Dr. Purbasari explained that government policy should ideally aim to achieve both internal and external balance.
Internal balance refers to domestic macroeconomic stability, marked by full employment and stable inflation.
External balance, meanwhile, refers to the stability between the current account balance and international capital flows.
Nevertheless, she noted that these two objectives often conflict.
“When a country implements policies to maintain internal stability, they may negatively affect external stability and vice versa,” Dr. Purbasari added.
She emphasized that comparing returns on investment is rational behavior, as capital will naturally flow to where it can achieve the highest returns at the same level of risk.
“Minister Purbaya needs to carefully consider this so that any depreciation of the Rupiah is not too drastic, which could leave the current account deficit unmanageable,” she stressed.
Dr. Purbasari also noted that liquidity management in the economy falls under the purview of monetary policy. Under Indonesian law, Bank Indonesia holds the mandate to safeguard the stability of the Rupiah, both in terms of inflation and its exchange rate against foreign currencies.
According to Balance of Payments statistics released by Bank Indonesia, Indonesia’s current and financial accounts experienced a shift this year.
By the first half of 2025, the current account recorded a deficit of USD 3.2 billion, while the financial account posted a deficit of USD 5.6 billion.
This contrasts with 2024, when the current account was also in deficit but the financial account still recorded a slight surplus.
Dr. Purbasari explained that the financial account deficit was driven by an outflow of portfolio investment, both bonds and equities, amounting to USD 8 billion. This outflow could not be offset by foreign direct investment (FDI), which reached only USD 5 billion.
“Portfolio investment is highly influenced by investor sentiment,” she stressed.
So far in 2025, the Rupiah has depreciated by only 1.44 percent against the US dollar.
However, it has weakened more significantly against other currencies: 4.62 percent against the Yuan, 8.17 percent against the Singapore dollar, 8.68 percent against the Australian dollar, and 14.42 percent against the Euro.
Author: Hanifah
Editor: Gusti Grehenson
Post-editor: Rajendra Arya
Illustration: Freepik