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Indonesian president reshuffles Cabinet to boost economy

August 12, 2015

JAKARTA, Indonesia (AP) — Indonesia’s president announced a Cabinet reshuffle Wednesday, replacing key economic ministers with the aim of speeding up infrastructure spending to revive sputtering growth and stabilize the sliding rupiah.

The Cabinet shake-up comes amid increasing public dissatisfaction with the lagging performance of Indonesia’s economy since Jokowi took office nearly ten months ago. Southeast Asia’s largest economy, home to more than 250 million people, grew 4.7 percent in the second quarter, the slowest pace since 2009.

Four ministers lost their jobs and two were rotated to less important positions, ending weeks of speculation in Indonesia about the possible changes.

President Joko “Jokowi” Widodo chose former central bank governor Darmin Nasution to become Indonesia’s new coordinating minister for the economy, replacing Sofyan Djalil.

Djalil has become the national development planning minister, replacing Andrinof Chaniago. Jokowi picked Thomas Lembong as trade minister.

Jokowi also appointed current Presidential Chief of Staff Luhut Panjaitan as the new coordinating minister for politics, law and security and a prominent economist Rizal Ramli as the coordinating maritime minister.

He did not speak to media after officially inaugurating the new ministers at a ceremony in the presidential palace.

Presidential spokesman Teten Masduki said in a statement that Jokowi made the changes because he wanted a more effective and coordinated Cabinet to respond to the challenges facing Indonesia economy.

Jokowi wants to “speed up the realization of the national development programs in order to improve people’s welfare,” he said.

Public dissatisfaction with Jokowi’s administration soared after it raised the price of fuel weeks after he took office on Oct. 20 because the government couldn’t afford to maintain heavy subsidies. The increase hit wallets and sparked a surge in prices for other goods.

Jokowi’s move to bring Nasution, who is regarded as highly competent, into the cabinet will likely cheer markets and analysts. He retired as Bank Indonesia governor in 2013 and has held important positions in the finance ministry that included director general of the tax office and head of the capital markets regulator.

Fadhil Hasan, a senior economist at Institute for Development of Economics and Finance, said the economic team’s status as a “target of public attack” made it particularly vulnerable for replacement. A fresh economic team could assuage public anger about the government’s failure to address the slowdown, he said.

Nasution’s replacement of Djalil also reduces Vice President Jusuf Kalla’s involvement in economic policy. Djalil had strong links to Kalla who clashed with Jokowi over economic policy.

Meanwhile, Indonesia’s currency, the rupiah, has fallen 8.5 percent against the U.S dollar since the beginning of 2015. It lost further ground on Tuesday and Wednesday after China announced a devaluation of its tightly controlled yuan.

Bank Indonesia’s deputy governor Mirza Adityaswara said that rupiah was “undervalued.”

He said the recent movement was primarily a reaction to China’s announcement which affected currencies across Asia.

“We believe that this will be temporary,” Adityaswara said. “We see that the rupiah is currently undervalued.”

Update hourly