Prabowo ousts finance chief, risking turmoil

Investors worry fiscal discipline could fade

- ANKUR BANERJEE RAE WEE

The abrupt removal of Indonesia's influential finance minister Sri Mulyani Indrawati has stunned markets, as investors fear the hard-fought fiscal credibility could be eroded by the populist and costly spending plans under President Prabowo Subianto.

The news of the finance minister's removal sent the rupiah tumbling over 1% yesterday, prompting Bank Indonesia to intervene in a bid to stabilise the currency.

The rupiah was last 0.9% weaker at 16,440 per US dollar. Jakarta stocks also sank 1%, with banking stocks the biggest drag.

Indonesia's central bank was also active in the bond market, buying longer-dated government bonds in an attempt to stabilise the market, two traders told Reuters.

Global investors have viewed Ms Sri Mulyani, one of Indonesia's longest-serving finance ministers in three different stints, as crucial to their bets in Southeast Asia's biggest economy and her previous departures sent markets tumbling.

"Mulyani was the safeguard of prudent fiscal policy," said Hasnain Malik, EM equity and geopolitics strategist at Tellimer. "Her departure will stir up fears of widening deficits under an unconstrained and, after the protests, under-pressure Prabowo."