Economist: Finance Minister's Visit to US Eases Concerns over Indonesia's Fiscal Position

Jakarta (ANTARA) - Economist from the Center of Reform on Economics (CORE) Yusuf Rendy Manilet believes that Finance Minister (Menkeu) Purbaya Yudhi Sadewa’s visit to the United States (US) helps to ease market concerns over Indonesia’s fiscal position. “In the short term, there is certainly an impact. At the very least, it can help alleviate market concerns, especially if the message conveyed is clear enough,” Yusuf said when contacted by ANTARA in Jakarta on Wednesday. However, according to him, this effect requires follow-up responses. The Indonesian Government’s conveyance of its commitment to maintaining fiscal discipline or strategies in responding to global pressures plays a role in creating temporary confidence. Therefore, if the goal is to achieve long-term impact, according to him, the Indonesian Government needs to prove its commitment through policy implementation. “Investors will look at what happens afterwards, not just what is stated in meetings. This includes institutions like Moody’s Investors Service, S&P Global Ratings, and Fitch Ratings, which will assess the consistency between the narrative and policy implementation,” he said. Yusuf stated that the current challenge that needs the government’s attention is regarding the flexibility of fiscal space. If commodity prices begin to normalise, state revenues are likely to face pressure. Meanwhile, state expenditures are relatively rigid, both for priority programmes and needs to maintain purchasing power. In such conditions, according to him, the government needs to arrange strategies to prevent the risk of widening the State Revenue and Expenditure Budget (APBN) deficit. “This is what the market will pay close attention to. Whether after that visit there are concrete steps, such as reprioritising expenditures or strengthening realistic revenue aspects? What is the deficit financing strategy?” Yusuf said. Yusuf underlined the risks looming if the deficit widens without credible strategies, including an increase in yields on Government Securities (SBN) and debt costs. “At this point, the market will also look at the quality of policies, not just the numbers. Whether the deficit widening, if it occurs, is measured and counter-cyclical, or instead reflects unresolved structural pressures,” he said. As a note, Finance Minister Purbaya held strategic meetings with World Bank executives, IMF Managing Director Kristalina Georgieva, and representatives of international rating agencies such as S&P Global Ratings. The Finance Minister stated that these global institutions appreciated the direction of Indonesia’s fiscal policy strategy under the leadership of President Prabowo Subianto.