September 25, 2025 | 07:10 am
TEMPO.CO, Jakarta - The call by economists is a warning sign of future economic disaster. It is a rebuke for Prabowo’s command economy style.
IF he does not want to stumble into economic catastrophe, President Prabowo Subianto needs to start listening carefully. A number of economists have sounded the alarm because the policies he has implemented are misdirected and have caused many problems.
On September 9, 2025, the Indonesian Economists Alliance conveyed seven recommendations about the economic emergency to Prabowo. They are corrections to the policies that have the potential to disrupt national economic stability. The seven demands are correcting the misallocation of funding, including reducing the Rp1,414 trillion spending on populist programs; restoring the independence of key state institutions; stopping the domination of the state, which is weakening economic activity; deregulation; prioritizing policies to address inequality; returning to evidence-based policies, and; improving the quality of institutions.
All these recommendations are relevant because many of the policies from Prabowo and the government have caused damage. Take the misallocation of funding. Since he came to office, Prabowo has poured funds into priority projects, which economists say threatens fiscal stability. The same is true of deregulation, as a number of regulations have slowed down economic activity. For example, there are distortive regulations for import quotas and domestic content that have disrupted trade.
The most striking regulation concerns the independence of key institutions such as Bank Indonesia, the Supreme Audit Agency, Statistics Indonesia, the House of Representatives (DPR), and the Corruption Eradication Commission. It is striking because Prabowo has intervened politically in these institutions in a number of ways.
The most recent example is the plan to revise the Financial Sector Development and Strengthening Law. In the draft currently being deliberated by the DPR, there is a provision that will extend the mandate of Bank Indonesia. As well as being the monetary authority and maintaining the stability of the rupiah and the payments system, the central bank will be tasked with helping to create jobs and promoting the growth of the real sector. There is also a very worrying article allowing members of the Bank Indonesia board of governors to be dismissed at any time by the DPR.
This is proof of Prabowo’s political intervention and “command” economy style. The President does not seem to realize that arbitrary changes to and political intervention in Bank Indonesia will erode investor confidence.
If investors abandoned Indonesia, the impact could be very serious. The flows of capital to fund development would stop, and lack of confidence in the central bank would cause the rupiah to fall in value. If this happened, rather than achieving economic growth of 8 percent, Indonesia would find itself facing an acute economic crisis.
Before it is too late, Prabowo must reflect and immediately stop his mistaken policies. The highly problematic free nutritious meal program, for example, should immediately be removed from the budget to stop more funds being wasted. And halting the funding scheme for the Red-and-White Village Cooperatives will stop state funds simply evaporating.
Most importantly, the government must implement the recommendation for deregulation and announce policies that address inequality so the wheels of the economy can turn once more and the results can be enjoyed by all.
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