As Suahasil Nazara takes the helm as the next Finance Minister, the market, local governments, and international observers may not be expecting a grand financial visionary. They want a competent firefighter.
The root of the issue lies in the executive suite itself. The rapid sequence of appointments reveals an administration struggling to reconcile grand political promises with fiscal reality. Sri Mulyani Indrawati was ousted when her institutional discipline stood in the way of massive flagship mandates. Her successor, Purbaya Yudhi Sadewa, acted as the compliant enabler—stamping every political check, shifting targets, and eroding institutional trust to accommodate the Palace’s demands. Now, Suahasil Nazara inherits the wreckage.
Instead of bold speeches promising sweeping structural transformation, Suahasil’s success will depend on fiscal triage. Can he contain these five immediate blazes before they combine into a full-blown crisis—or will he, too, be consumed by the President’s unyielding spending appetite?
1. Revenue shortfall coupled with tax refund backlogs
The most immediate fire to tame is a revenue architecture that is currently bleeding cash. Until August 2026, tax revenue reached just Rp 1,409.1 trillion, a mere 59.8 percent of the annual APBN target. With four months left to collect the remaining 40.2 percent, the shortfall highlights targets set unrealistically high to finance ambitious spending and meet the political goals of the administration.
Compounding the problem is the controversial strategy of withholding tax refunds to artificially bolster revenue figures. As businesses complain of stalled cash flows, analysts warn that holding back refunds could trigger an actual tax shortfall of Rp 80 trillion to Rp 140 trillion. This could directly harm private sector liquidity and job creation.
Amid an economy already struggling, general tax hikes are simply out of the question. Suahasil must perform a tough balancing act: find innovative ways to raise revenue and improve our ever-dwindling tax-to-GDP ratio without further burdening a fragile economy. That means focusing on structural leaks: overhauling administrative collection mechanisms, expediting digital tax integration without technical friction, and setting future revenue targets rooted in economic reality rather than political fantasy.
2. Expensive flagship political programs
The second blaze sits at the intersection of political ambition and basic arithmetic. The Prabowo administration’s flagship social initiatives, most notably the Free Meal Program (MBG) and the Merah Putih Village Cooperatives (KDMP), carry massive price tags and immense political momentum.
While the policy goals are understandable, running them without fiscal discipline threatens to bleed the national budget dry. This is where Suahasil faces his ultimate test.
These presidential flagship programs require strict budgetary guardrails: phased rollouts, aggressive independent auditing, and precise geographic targeting to prevent waste. If a program runs over budget, the ministry must have the authority to pause, recalibrate, or scale back execution. Ideology must not break the bank.
3. Pandemic-era debt maturing amid higher borrowing costs
The third is a dangerous ticking time bomb: a massive “debt wall” reaching maturity. In 2026, government debt maturity hit a peak of Rp 833.96 trillion — the highest point in the current SBN repayment cycle — compounded by Rp 154.5 trillion in maturing central bank burden-sharing bonds from the pandemic era.
Debt service interest alone is projected to swallow Rp 599.44 trillion, consuming more than 22 percent of total tax revenues. When combined with principal repayments, total debt obligations threaten to absorb nearly 45 percent of state revenue. Managing this mountain of debt in a global “higher-for-longer” interest rate environment leaves zero room for error. The challenge lies in executing this massive refinancing drive under the weight of global “higher-for-longer” interest rates. With market volatility elevated, every new bond issuance risks locking Indonesia into elevated borrowing costs for years to come.
Suahasil must execute a deliberate refinancing strategy. That involves careful secondary market management, active debt restructuring, and transparent communication with institutional investors. Restoring credibility is the single effective hedge against paying higher risk premiums. Bondholders need to know that the Ministry of Finance is once again run with steady, predictable discipline, unswayed by executive pressure to take on more expensive debt for short-term spending.
4. Friction between local governments over budget transfer cuts
Outside Jakarta, regional governments have struggled as central government transfers (TKD) have been severely slashed since President Prabowo took office in 2025.
These central funding cuts were effectively used to squeeze regional administrations in order to free up liquidity for top-down, centralized flagship initiatives. Essential local infrastructure halts, public service quality drops, and local administrations risk insolvency.
As the treasury, the Finance Minister cannot just drop the axe and walk away. Suahasil needs to balance central fiscal discipline with targeted regional support. This requires implementing conditional liquidity facilities for distressed municipalities while granting local governments broader, regulated space for local revenue autonomy. Slashing transfers without providing alternative survival mechanisms simply exports central fiscal stress to regional administrators and citizens alike.
5. Blurring of boundaries between the Treasury and the Central Bank
The final blaze to contain originated from a fundamental blurring of institutional boundaries. Under intense pressure to deliver quick wins for the administration, Purbaya’s Finance Ministry blurred the line between fiscal management and monetary intervention, notably by pouring vast sums from the accumulated cash balance (Dana SAL) directly into state-owned Himbara banks under the guise of injecting liquidity.
This was a misdiagnosed medicine for a non-existent illness. State banks were not facing a liquidity shortage; they were constrained by structural credit demand and macroeconomic risk. By treating state cash balances as a pseudo-monetary tool, the Finance Ministry crossed into central bank territory.
Suahasil must retreat from this policy overreach and return the Treasury to pure fiscal fundamentals. Crucially, he must repair working relationships with Bank Indonesia, establishing harmonious, coordinated policy channels rather than attempting unilateral liquidity engineering that unnerves financial markets.
Bringing back institutional trust
Ultimately, one of the most vital tasks awaiting Suahasil is restoring institutional trust. It’s an intangible asset severely damaged over a year of rapid ministerial churn and fiscal appeasement. Fiscal policy relies heavily on credibility, and credibility is built through measured, predictable, and prudent statements and actions.
Suahasil’s legacy will not be carved out by trying to please the Presidential Palace or by endorsing unchecked spending in the name of political harmony. It will depend entirely on whether he chooses to act as an unyielding fiscal anchor — willing to speak with discipline and say no when arithmetic demands it — and whether President Prabowo grants him the structural room to do so.
If the presidency continues to demand validation for an unsustainable agenda, even a third minister will not stop the bleed. The fires are raging, but Suahasil can only put them out if the President allows him to hold the hose.