Financial Markets Correct, Rupiah Weakens and Jakarta Composite Index Falls
Financial Markets Correct After Cabinet Reshuffle, Rupiah Weakens and JCI Falls
Following the dismissal of Finance Minister Sri Mulyani Indrawati, Indonesia’s financial markets showed a significant reaction. The benchmark stock index fell 1.8% on Tuesday’s trading, while the rupiah weakened 1% against the US dollar, reaching Rp16,470 per dollar.
Miguel Chanco, chief Asia economist at Pantheon Macroeconomics, noted that this dismissal signals a shift away from the credible, reliable, and disciplined fiscal policies long in place.
“Now we suddenly find ourselves in a period of uncertainty under a president who has previously spoken rather loosely about the need for sustainable fiscal discipline,” he said.
Previously, President Prabowo expressed his intention to increase state spending, including through debt, and questioned the need for maintaining the fiscal deficit cap below 3 percent.
Although the new Finance Minister, Purbaya Yudhi Sadewa, delivered optimistic remarks, this was not enough to stop the market correction.
Bhima Yudhistira Adhinegara, Executive Director of Celios, stressed that Purbaya faces urgent tasks to restore public and investor confidence and review tax policies to improve household purchasing power.
“Until then, investors are likely to continue speculating, especially regarding the 2026 budget efficiency program and tax policies,” he said.
David Sumual, BCA’s chief economist, added that Indonesian stocks and the rupiah are unlikely to recover in the near term. Investors prefer to wait while assessing the policy direction of the new Finance Minister.
“Purbaya is a new figure, and investors want to see what policies he will implement,” he said.
This situation marks the beginning of a period of uncertainty in the financial markets, where decisions and policies from the new cabinet will be closely watched by both domestic and international investors.
[Source: Pantheon Macroeconomics, Celios, BCA – 2025]