(Bloomberg) -- Indonesia has appointed Thomas Djiwandono, President-elect Prabowo Subianto’s nephew, as a deputy finance minister.
Outgoing President Joko Widodo named Djiwandono as second deputy finance minister in Jakarta on Thursday. Deputies were also named for the investment and agriculture ministries. Reuters reported the planned appointment earlier.
The appointment of Prabowo’s family member to the cabinet could give the incoming leader more influence over state spending as he seeks to fund ambitious programs including free lunches for schoolchildren. Djiwandono is Prabowo’s key economic adviser, who has sat alongside Finance Minister Sri Mulyani Indrawati in June to discuss the 2025 budget.
Investors gave the appointment somewhat of a thumbs down, with the cost of insuring Indonesia’s debt against default spiking the most in three weeks following the news, according to Bloomberg-compiled data. The rupiah underperformed Asian peers, weakening 0.4% to 16,157 per dollar.
Foreign investors have pulled a net $1.1 billion from government bonds this year due to concerns that the new administration will raise the debt ratio as well as whipsawing global monetary policy outlook.
“Investors feel pessimistic with the sudden appointment,” said Lionel Priyadi, macro strategist at PT Mega Capital Sekuritas. “They remain skeptical with the fiscal posture of the next administration. It remains unclear what is the actual Prabowo’s policy platform.”
Djiwandono’s focus will be the 2025 state budget as the government starts incorporating Prabowo’s programs into calculations, said Finance Minister Indrawati in a separate briefing. The appointment will simplify communication and ensure continuity between the outgoing and incoming administrations, she added. Prabowo’s finance chief has yet to be named.
Political Dynasty
Djiwandono is the son of a former Bank Indonesia governor. He started his career as a journalist before working as a financial analyst in Hong Kong. His uncle, who is Prabowo’s brother, then appointed him to become deputy CEO of his conglomerate Arsari Group. Djiwandono holds a B.A. in history from Haverford College and M.A. in international relations and economics from Johns Hopkins University.
“While Djiwandono may not have an academic economics background, his appointment doesn’t seem problematic for markets,” said Philip McNicholas, Asia sovereign strategist at Robeco in Singapore. “It may be that his focus will be on ensuring the implementation of Prabowo’s favored economic policies.”
The choice of Djiwandono could also spur more public concern over the growing dominance of political dynasties in the country. Jokowi, as the president is known, has himself weathered accusations of election-meddling for being widely seen as supporting Prabowo when his eldest son campaigned to become vice-president alongside the former general.
Others in the market were more optimistic about the selection, given his coordination with current finance chief Indrawati.
“We remain confident in Sri Mulyani’s fiscal discipline and expect financing to remain manageable for fiscal year 2024,” said Jason Pang, a fixed income portfolio manager at JPMorgan Asset Management in Hong Kong. Government bonds may remain “range-bound” as US monetary policy may shift to a slight easing cycle and leave room for Bank Indonesia to be dovish, he added.
--With assistance from Matthew Burgess, Faris Mokhtar, Norman Harsono, Catherine Bosley, Harry Suhartono and Claire Jiao.
(Updates with incumbent finance minister’s comments)
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