Indonesian markets rattled as finance minister’s exit stokes fiscal worries

BENGALURU: The Indonesian rupiah sank the most in five months and stocks plunged nearly 2 percent on Tuesday, after an abrupt ouster of the nation’s influential finance minister sparked fears that populist spending could erode hard-won fiscal discipline.

Sri Mulyani Indrawati, one of Indonesia’s longest-serving finance ministers, was instrumental in maintaining the country’s fiscal targets and is viewed by investors as a cornerstone of confidence in Southeast Asia’s largest economy.

Her departure, which comes as Indonesia grapples with widespread protests and unrest, has rattled global investors who fear populist spending plans under President Prabowo Subianto could deplete the country’s fiscal credibility.

The rupiah fell up to 16,495 per US dollar in its worst one-day plunge since the early-April sell-off which was triggered by steep US tariffs. The sharp decline prompted Bank Indonesia to intervene to stabilise the currency.

Stocks in Jakarta tumbled 1.8 percent to their weakest point since September 1.

Yields on 10-year sovereign bonds rose sharply to their highest since early August, while those on 3-year notes fell to a two-year low, signalling uncertainty over long-term fiscal and economic stability. Foreign investors pulled out 526.2 billion rupiah (USD31.97 million) from Indonesian stock markets on Monday, taking the cumulative outflows this year to 52.28 trillion rupiah, as per LSEG data.

“Indonesia is facing higher policy uncertainty in the near-term, which justifies a more cautious view until we see clear signals on fiscal and monetary alignment under the new administration,” said Ernest Chew, ASEAN portfolio manager at BNP Paribas.