Between Continuity and Change: What Ibu SMI’s Resignation Means for Indonesia.
By Rizkia
Published On September 11, 2025
Markets are moved by trust, and trust is always harder to build than to lose.
With the resignation of Sri Mulyani Indrawati, Indonesia is not merely appointing a new finance minister — it is closing a two-decade chapter where one individual embodied the nation’s fiscal credibility. Few countries in the developing world have been so closely associated with a single figure’s stewardship. Few ministers anywhere have carried the weight of both global recognition — as former Managing Director of the World Bank and Executive Director at the IMF — and domestic resilience, guiding their nation through crises that could easily have derailed its trajectory.
This is more than a personnel shift. It is a test of whether Indonesia’s credibility can outlast the person who personified it.
Global and Local Trust: The Two Anchors
Trust is a dual asset.
For the global community, Sri Mulyani was a seal of approval. Her presence lowered risk perceptions, translating into cheaper borrowing costs and easier access to international capital. A Jakarta bond issuance with her name on it carried a weight disproportionate to the paperwork. Markets knew fiscal prudence would not be easily compromised.
For domestic audiences, the story was more complex. She was often seen as austere, sometimes accused of being “too international.” Yet even her critics acknowledged her rigor. Whether admired or resented, Indonesians trusted that she would not allow reckless spending to jeopardize stability.
In my years in Indonesia’s retail banking and investments, I have seen how trust is not just an intangible sentiment — it is a measurable force. When people trust their bank, they deposit more, borrow with confidence, and invest for the long term. When trust falters, deposits shrink, credit slows, and consumption freezes. The same logic applies at the national level. A trusted finance minister can expand fiscal space without sparking panic. A doubtful one may struggle, even with the best intentions.
Credibility as Currency
Credibility is itself a currency.
Indonesia’s creditworthiness has never rested solely on debt-to-GDP ratios. Investors have long priced in what I call the “SMI premium” — the belief that fiscal discipline would hold even in turbulent political times. That credibility premium saved Indonesia basis points worth billions in debt servicing.
Losing that premium is like losing a reserve asset. Not one you can measure in tons of gold or barrels of oil, but in confidence and perception. And once it erodes, rebuilding it takes years.
Politics vs Policy
The appointment of Purbaya Yudhi Sadewa has inevitably sparked debate. His academic credentials and policy experience are clear enough. The real question is not whether he is capable. It is whether he will be allowed to act independently.
Economic policy in Indonesia has always danced with politics. At times, the music is harmonious; at others, it drowns out discipline. This tension is not unique — many emerging economies wrestle with it. Yet Sri Mulyani managed to hold her line, even when it cost her politically. That was her greatest strength.
Will her successor have the same latitude? Or will fiscal stewardship bend closer to political bargaining — and at what cost? This is where credibility is tested: not in academic theory, but in the tug-of-war between technocracy and politics.
The Layman’s Vantage Point
To the ordinary citizen, cabinet changes mean little unless they show up in lived reality. People care less about bond yields and more about the price of rice, the affordability of fuel, or whether their salary stretches until month-end.
Credibility must be felt on the ground. A mother buying groceries in Yogyakarta or a driver topping up fuel in Medan doesn’t parse fiscal reports. They sense stability in prices and wages, and they interpret volatility as mismanagement.
For younger generations, particularly Gen Z, this lens is sharper still. As we saw in Nepal’s youth uprisings, today’s young no longer wait patiently for stability to trickle down. They demand relevance now. Digital natives, they are used to instant access and real-time results. For them, credibility is not a fiscal statement — it is whether their gig-economy income and e-wallet balances can last the week.
This generational impatience is both a challenge and an opportunity. Leaders who understand it can shape lasting trust. Those who ignore it risk losing legitimacy faster than any budget deficit can signal.
The Break Within
President Prabowo’s choice of Purbaya is not only about external optics. It also reveals internal dynamics. Will this be seen as a seamless succession, or as a potential fracture — a “break within”?
The issue is less about technical ability and more about alignment. Can Purbaya assert independence while serving the president’s political ambitions? Or will compromise dilute credibility? Markets are highly attuned to such signals. Even subtle discord can amplify risk premiums.
Year-end budget reviews and the opening of a new fiscal year are unforgiving benchmarks. By then, both markets and citizens will have drawn their first verdict. In effect, the new minister has three months to prove his worth.
Dancing with Cycles
Ray Dalio’s framework of How the Economic Machine Works is instructive here. Economies are machines that move in cycles: expansion, contraction, correction, recovery. These are not failures of policy; they are features of the system.
The role of policymakers is not to eliminate cycles — that is impossible. Their task is to smoothen them: shorten recessions, extend booms without overheating. The role of business communities, in turn, is to adapt, not to resist.
Sri Mulyani’s tenure embodied this philosophy. She never promised perpetual sunshine, but she consistently provided shelter in storms. That steadiness, often unglamorous, was the mark of her stewardship.
The danger now is to treat the economy as a ride to be taken “all the way into the sunset with guns blazing.” It is politically appealing in the short term, but it risks exhausting the machine itself. Cycles are not calamities; they are calibrations. The true danger lies in leaders who mistake downturns as personal failures to deny or as storms to power through recklessly.
Classroom vs Street Credo
This brings us to Purbaya. His classroom intelligence is not in doubt. But markets, households, and investors alike will judge him not by academic logic but by street credibility — the kind Sri Mulyani built over 20 years in trenches of policy battles, international negotiations, and domestic crises.
His maiden appearance before parliament did little to inspire. His explanations leaned heavily on textbook reasoning – for me personally, he was telling the story as if cycles could be commanded to gallop faster. This may work in the classroom. But yet markets will be a less forgiving students. They question every gap between theory and lived reality.
Economic stewardship is not about data models alone. It is about judgment under pressure, clarity in communication, and the trust that comes from repeated proof. For Purbaya, this will be the real exam. His lectures are over; the markets are his new classroom. And this classroom will not skip lessons — it will test him every single day.
Closing: Calm Clarity Amid Uncertainty
Sri Mulyani’s departure is not the end of Indonesia’s credibility story. It is the start of a test: can institutions prove stronger than individuals, can trust survive beyond symbols, and can politics respect the discipline of policy?
The answers will not be written in speeches or academic papers. They will be written in the lived confidence of households, the investment decisions of businesses, and the capital flows of global markets.
For those of us who have lived through multiple cycles of boom and bust, the reminder is simple: change is inevitable, but credibility is optional. It must be earned, not inherited. And once lost, it is the hardest currency to regain.
All opinions are mine – Photo Credit: IG kompasfoto