As Indonesia’s President-elect Prabowo Subianto prepares to announce his new cabinet on October 20, coinciding with the presidential inauguration, there is widespread discussion about who will lead the country’s economic institutions, particularly the Ministry of Finance.

Indonesia’s Ministry of Finance (MoF) plays a particularly important role in the country’s economic management due to the legacies of the Asian Financial Crisis of 1997-1998. The disastrous impacts of the crisis led to several key reforms, including the passage of the Law on State Finance, which caps the annual budget deficit at 3 percent of GDP and the debt-to-GDP ratio at 60 percent. This gives it significant powers in planning and monitoring the state budget, consequently reducing the role of the Ministry of National Development Planning, a key institution during the Suharto era.

The discussion on who will lead the MoF depends on two factors: what the president-elect wants, and which technocrats are available to serve these interests.

Prabowo’s View

When Bloomberg reported last month on Prabowo’s plan to increase Indonesia’s debt-to-GDP ratio to 50 percent in order to finance his spending programs, particularly his free lunch program, some MoF officials discreetly expressed their concerns.

On June 25, members of Prabowo’s economic team, along with current Finance Minister Sri Mulyani Indrawati and Coordinating Minister of Economic Affairs Airlangga Hartarto, stated that the debt plan was untrue and that Prabowo’s administration was committed to the 3 percent deficit set by the law. The government also announced the $4.3 billion budget for the free-lunch program for 2025 fiscal year, tempering rumors that it might cost as much as $29 billion.

Prabowo has eight main priority programs, but those programs will change and there will likely be adjustments over time, which is normal in governing. Politically, Prabowo will continue those of President Joko “Jokowi” Widodo’s programs that have proven successful, such as infrastructure projects and social support programs.

In addition to the free lunch program and continuing Jokowi’s new capital project, Prabowo’s administration will have more ministries and departments to accommodate his large coalition, after revising the regulation limiting the number of ministers to 34. This will require additional budget allocations.

Budget management already looms as a particularly complex challenge for Prabowo’s team. A source close to Prabowo’s Gerindra party said that the current minister, Sri Mulyani, “is too conservative and seems critical of Prabowo’s programs.”

To ensure his agenda is implemented effectively, the president-elect needs someone flexible enough to navigate his programs while maintaining an overall prudent fiscal policy. Who are the leading candidates?

The Technocrats  

When Jokowi became president in 2014, he was a mid-level furniture businessman from the small city of Solo, with no significant familiarity with macroeconomics. In contrast, Prabowo is the son of a renowned Indonesian economist. His brother-in-law, Sudrajat Djiwandono, was a major economist and central bank governor (1993-98) during the Suharto era, and his brother Hashim Djojohadikusumo is a prominent businessman who also serves as one of his economic advisors.

Due to his background, Prabowo may be willing to take greater risks in choosing who to head the MoF than Jokowi.

Currently, there are two main camps of technocrats in Indonesia. The first group consists of academics such as Sri Mulyani, Chatib Basri, and Bambang Brojonegoro, who are affiliated with the economics faculty at the University of Indonesia. Their expertise lies in macroeconomic policies, and they are known for their prudent management of the state budget. Their academic credentials and macroeconomic policies have gained global recognition.

The second group consists of bankers such as Budi Gunadi Sadikin, Kartika Wirjoatmodjo, and Pahala Mansury. These individuals excel in asset discounting, finance, and microeconomics. They are prudent but willing to take risks beyond the conservative standards of recent years. Under Jokowi’s ten-year presidency, these bankers have gained a reputation as deal makers.

Among those technocrats, three names frequently come up in discussions as potential candidates.

The first is Budi Gunadi Sadikin. Currently serving as the minister of health, Budi is renowned for his role in  acquiring Freeport-McMoRan’s shares in its copper and gold mines in Papua in 2018, using global bonds instead of the state budget, a move that pleased Jokowi. He also successfully managed the COVID-19 crisis and implemented the Health Law in 2023.

The second is Chatib Basri, a technocrat who served President Yudhoyono as minister of finance (2013-14) and Chairman of the Indonesia Investment Coordinating Board (2012-13). Chatib is seen as a middleman; he is prudent but not as conservative as Sri Mulyani, allowing room for negotiation and innovative solutions. His good relationships with political stakeholders, academia, and the private sector would be crucial for budget negotiations.

The third name is Kartika Wirjoatmodjo (Tiko). Like Budi, Tiko is a well-known banker. He earned a reputation as an effective manager during his tenure as CEO of Mandiri (2016-19) and as the vice minister of state-owned enterprises since 2019. As a banker, Tiko understands the financial dynamics of large business groups in Indonesia. Due to this expertise, there is speculation that if Prabowo separates the Directorate General of Taxes from the Finance Ministry, Tiko will be a candidate to head this new Tax Department.

Other names, such as Pahala Mansury, the current vice minister of foreign affairs, Mahendra Siregar, the chairman of the Financial Services Authority, and Ari Kuncoro, former dean of the Faculty of Economics at the University of Indonesia, have also surfaced in recent weeks. The selection process is dynamic, and more names are likely to appear before the final choice is announced.

For the past twenty years, the MoF and its longest-serving minister, Sri Mulyani, have done a commendable job managing Indonesia’s macroeconomic policies. However, with a change in political leadership, there will be a need for a different policy approach in Indonesia’s most powerful ministry.

The Ministry of Finance’s power and independence will remain intact – Prabowo will not risk undermining these during a period of rocky global politics and low economic growth – but we will likely see a less conservative figure than at any point since the Asian Financial Crisis.