What specific actions by President Prabowo are concerning investors?

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President Prabowo's Administration Faces Investor Concern Over Policy Decisions

President Prabowo Subianto's administration has generated significant investor apprehension due to a series of policy decisions perceived as unorthodox and potentially undermining economic stability. These actions have contributed to a sharp decline in Indonesia's currency and stock market performance, leading to substantial foreign capital outflows and a negative outlook on the country's credit ratings. The administration's departure from fiscal discipline, coupled with concerns about central bank independence and the centralisation of commodity exports, are key drivers of this investor unease.
Centralisation of Commodity Exports Under Sovereign Wealth Fund

A significant point of contention for investors is the plan to centralise commodity exports under Danantara, a sovereign wealth fund directly reporting to President Prabowo. This move is viewed as a departure from established market mechanisms, with analysts suggesting it may lead to less efficient export processes compared to market-driven approaches. The establishment of this fund and its direct oversight by the President signals a concentration of economic control that raises concerns about transparency and policy predictability.
Expanded Mandates and Perceived Threats to Central Bank Independence

Recent legislative changes have granted the Indonesian parliament new powers to direct the central bank and have added a mandate for "real sector growth." Investors perceive these developments as a direct threat to the central bank's independence, a crucial factor for maintaining economic credibility and stability. The nomination of President Prabowo's nephew as a deputy governor of the central bank further exacerbates these concerns, suggesting potential political influence over monetary policy decisions.
Unorthodox Growth Strategies and Fiscal Discipline Concerns

The administration's commitment to pursuing growth through populist policies, such as the promise of free meals for millions of school children, has led to a departure from decades of spending discipline. This shift, combined with the economic pressures from global energy shocks, has prompted rating agencies like Moody's and Fitch to revise their debt rating outlooks to negative, citing reduced policymaking credibility. S&P has indicated its rating will be contingent on improvements in fiscal buffers, highlighting the market's focus on fiscal prudence.
Market Reaction and Foreign Capital Outflows

The cumulative effect of these policy decisions has manifested in severe market underperformance. Indonesia's stock market has become the world's weakest performer in 2026, experiencing a decline of over 42 percent. Concurrently, the rupiah has become the world's worst-performing currency against the US dollar this year, depreciating by 8 percent and reaching a record low of 18,190 per US dollar. This currency depreciation has coincided with significant foreign selling of stocks, with outflows reaching US$3.2 billion by the end of May, the heaviest since 2009, and foreign ownership of government bonds collapsing to a near 20-year low of 12.6 percent.

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What specific actions by President Prabowo are concerning investors?

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