Indonesia's Finance Minister Pick Could Be Tonic Markets Want

By Amanda Lee and Fabiana Negrin Ochoa

Indonesia has appointed its third finance minister in under two years. That shouldn't inspire much confidence, but analysts say the experienced technocrat could be an antidote for worries about erratic policymaking.

Suahasil Nazara steps into the role with a solid track record. A seasoned economist, he spent almost seven years as deputy finance minister, including under Sri Mulyani Indrawati, the respected former finance minister whose ouster in late 2025 was one of the catalysts that contributed to Indonesian markets' loss of credibility.

He inherits a challenging position: Keeping the budget deficit below the 3% legal ceiling while balancing expansive social programs such as the government's flagship free-meals program.

External headwinds abound too. Drawn-out fighting in the Middle East is keeping energy prices high, heaping pressure on the oil-sensitive rupiah, threatening to swell Indonesia's import bill and adding fiscal strain.

A sustained rise in oil prices could bring Indonesia's fuel subsidy bill to as much as 1.1% of gross domestic product, necessitating expenditure cuts, OCBC economists Lavanya Venkateswaran and Ahmad A Enver said.

Then there's the crisis of confidence among foreign investors. Indonesia's assets have fallen out of favor this year as ratings companies and index providers flagged issues around transparency and investability.

Still, analysts say Suahasil has a shot at winning back investor and institutional confidence.

The initial market reaction to President Prabowo Subianto's announcement Monday signaled cautious optimism, with the Jakarta Composite Index erasing most of its session losses to end the day 0.1% lower.

Whether sentiment firms will depend on whether the new finance minister can communicate more convincingly than his predecessor, Purbaya Yudhi Sadewa, who was in the role for about a year.

Purbaya's tenure was marked by conflicting messages on fiscal policy, crucially over the commitment to keep the budget deficit under 3.0% of gross domestic product, said Capital Economics' Gareth Leather.

Suahasil will need to be much clearer about his priorities and provide investors with more consistent signals on fiscal policy, Leather said.

Execution will be key too.

OCBC thinks respecting the 3.0% limit seems manageable as the deficit is tracking at about 2.7% of GDP.

Still, Suahasil has his work cut out for him in navigating cash-intensive government programs and new policies including an initiative to manage commodity exports.

Economists at Citi don't expect to see a change in the political directions of flagship programs such as free meals and infrastructure. But management could change.

Suahasil, who has a doctorate from the University of Illinois Urbana-Champaign, has been consistent in his priorities: quality of spending over headline expansion, tax administration over rate increases, and adherence to the deficit ceiling, Citi said.

"We expect tighter control of social spending leakage and greater use of state financial institutions to mobilize private capital for infrastructure, rather than balance-sheet expansion at the center," Citi's Ferry Wong said.

Stock-exchange reforms to address concerns brought up by index providers have been taken as a positive step toward a market turnaround. A similar investor-friendly pivot at the finance ministry could be the next trigger for putting Indonesia back in investors' good books.

Write to Amanda Lee at amanda.lee@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com

(END) Dow Jones Newswires

September 15, 2026 04:24 ET (08:24 GMT)