PROF. FERRY LATUHIHIN BONGKAR LAGI PERSOALAN BERAT EKONOMI INDONESIA

Participants

• Prof. Ferry Latuhihin
• Prof. Topo (host/interviewer)

Overview

Prof. Ferry and Prof. Topo discuss Indonesia’s economic pressures, with a focus on the reported resignation of Bank Indonesia (BI) Governor Perry Warjiyo and the broader political-economy factors behind currency instability.

Main points and arguments

1) BI governor resignation as a major signal (a “first time” precedent)

Prof. Ferry argues that Perry Warjiyo’s resignation—reportedly due to political pressure after remarks related to an IMF meeting, as well as alleged slander connected to government-backed cooperative projects (KDMP/Merah Putih Village)—is unprecedented in Indonesia’s republican history.

The key concern is not only the personal resignation, but what it implies about BI’s independence.

2) Central bank independence is essential for currency stability

The presenters emphasize that BI must remain institutionally independent. They argue that government interference undermines investor confidence and contributes to rupiah pressure.

Ferry notes that the market likely doubts BI will act independently under the current government approach.

3) Concerns that BI is being used like a “money printing machine” for fiscal needs

A core critique is that BI’s involvement in government securities (SBN/SRBI) effectively supports the state when it needs funding, thereby reducing BI’s autonomy.

Ferry compares the situation to pre-crisis style burden-sharing and warns that pressuring BI to finance or accommodate government deficits—including through politically driven spending—would be dangerous.

4) Political spending programs (MBG and KDMP) are portrayed as economically unproductive

Ferry repeatedly frames MBG and KDMP as political projects rather than economic programs, arguing they do not generate value commensurate with their very large fiscal costs. He claims:

• The programs require financing on the order of hundreds of trillions of rupiah over years.
• A cited example: a cooperative with substantial capital for months reportedly produced only a tiny profit relative to the capital, suggesting weak real economic performance.
• If financed via deficit pressure, taxpayers (the public) may ultimately bear the cost.
• There are also concerns about forceful implementation at village level (including the alleged involvement of TNI personnel), reinforcing the “political” framing.

5) Rupiah weakness linked to BI policy tools and higher swap costs

The discussion highlights BI swap mechanisms as a hedging tool for foreign investors and businesses exposed to dollar risk.

However, the presenters state that swap-related costs have risen sharply (described as increasing from 1.25% to 3%), making Indonesia less attractive and worsening rupiah pressure.

6) Intervention and speculative-attack risk (currency attack framing)

Ferry explains that BI intervention could be tested by markets/speculators. He references the idea of a speculative attack—using historical analogies such as hedge-fund examples (e.g., Soros).

The concern is that if reserves and swap arrangements are judged insufficient, pressure on the rupiah could intensify—potentially beyond what is manageable.

7) Foreign exchange reserves adequacy questioned

The presenters discuss foreign exchange reserves (around US$145B mentioned) and how reserves adequacy is measured, including:

• Coverage against import needs (described as several months)
• Dollar-denominated debt due
• Debt tenor (short-term vs. long-term)

They argue that even if reserves appear sufficient by official metrics, reserves are pressured by upcoming obligations and by how markets assess BI’s defensive capabilities.

8) Growth skepticism: numbers driven by government spending, not “real” improvement

Even with reported growth figures (around 5.29% and 5.61% across quarters), Ferry argues there is skepticism because observable conditions do not match—such as patterns of activity in Jakarta and signs like mall softness.

He attributes much of growth to government spending, which he describes as increasing strongly, and questions sustainability if spending is not productive.

9) Indonesia’s debt burden and fiscal sustainability concerns

Ferry estimates Indonesia’s debt burden is very large (figures like ~10,300 trillion rupiah are cited, including multiple program-related and transport/other liabilities).

He argues that high interest costs (example cited: about 7% on SBN) could imply extremely large annual interest burdens. He also claims there is insufficient political will to stop or re-evaluate spending programs.

10) Institutional and rule-of-law problems deter investment

Beyond macro policy, Ferry highlights structural issues that may reduce investment attractiveness, such as:

• Bureaucratic complexity (“fat bureaucracy”)
• Regulatory uncertainty
• Property-right concerns
• Examples of assets being seized (even if later returned)

He suggests investors might consider alternatives like Vietnam, which is portrayed as a faster-growing competitor.

11) Public dissatisfaction and the “political climate” effect

The discussion cites survey findings (with Saiful Mujani mentioned) showing declining public satisfaction with the president and economic conditions.

Ferry links dissatisfaction to:

• Taxation without consultation
• Public perceptions that subsidy/financing of projects is ineffective

This is presented as reinforcing a political-pressure atmosphere around BI.

Implied conclusion

Overall, Prof. Ferry’s stance is that Indonesia’s economic stress—especially rupiah volatility—is driven by:

• Politicization of fiscal/central bank roles (including reduced BI independence)
• Large unproductive political spending
• Declining investor confidence due to diminished institutional credibility
• Broader institutional weaknesses that reduce investment attractiveness

The reported BI governor resignation is treated as a symbolic focal event reflecting these deeper problems.