ndonesia has a new finance minister. On Sept. 14, Suahasil Nazara, my colleague at University of Indonesia’s (UI) economics faculty, was sworn in to replace Purbaya Yudhi Sadewa, the third person to hold the post since President Prabowo Subianto took office less than two years ago.
Suahasil is no outsider: deputy finance minister since 2019, and in his own words, this is “not a change, but simply a continuation.” I do not expect his appointment alone to shift the administration’s stance, but it puts an economist who understands the stakes closer to the levers.
Something unusual is happening in the global economy. Many advanced economies that once set the benchmark for macroeconomic discipline now struggle with problems more common to emerging markets: large fiscal deficits, rising public debt, persistent inflation and difficult political choices. Aging populations, geopolitical pressures and rising defense spending are squeezing fiscal space across Europe, while Japan carries an exceptionally large public debt as it exits decades of ultra-low rates. For emerging economies with sound policies, this creates a rare opportunity to narrow the credibility gap.
The United States illustrates this most clearly: US Treasuries remain the benchmark against which global risk is priced. Its 10-year yield is now close to 5 percent, against roughly 7.2 percent for Indonesia, a gap of only 225 basis points. The rupiah has weakened to around 17,600 per dollar, but the distance between advanced-economy and Indonesian pricing has become unusually narrow.
For decades, emerging economies such as Indonesia paid a substantial premium over advanced economies, partly for inflation and currency risk, partly for institutional credibility, since investors trusted US institutions. That advantage has not disappeared, but it is no longer overwhelming: large US deficits, rising debt and inflation risk have pushed long-term rates higher, a problem for America and, paradoxically, an opportunity for Indonesia.
Convergence normally happens because poorer countries improve faster than richer ones. But it can also happen when the benchmark deteriorates while the emerging economy improves. Indonesia does not need to become Switzerland overnight, it needs to become consistently more credible relative to the alternatives available to global investors.
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Suppose US yields stay around 4.5–5 percent while credible policies bring Indonesian bond yields toward 6 percent, narrowing the spread to 100–150 basis points, a significant structural re-rating that would cut the economy-wide cost of capital and better support the rupiah.