Indonesia has undergone a remarkable economic transformation over the past two decades, evolving into one of the world’s fastest-growing economies.
Central to this journey has been Sri Mulyani Indrawati, the country’s finance minister, whose leadership has guided Indonesia through significant economic reforms and global challenges.

From strengthening macroeconomic stability to pioneering industrial policies, Indrawati has played a crucial role in positioning Indonesia as a major player on the world stage.

Steering Indonesia Through Economic Challenges

Indonesia, an archipelago of 270 million people, has seen its GDP quadruple to $1.4 trillion over the last twenty years. The percentage of the population living on less than $2.15 a day has dropped tenfold, while income levels in Jakarta now compare with those in Poland and Portugal. These achievements are the result of sustained economic reform, a process in which Indrawati has been a key figure.

Indrawati first took office as Finance Minister in 2005 under President Susilo Bambang Yudhoyono. After serving as a Managing Director at the World Bank from 2010 to 2016, she returned to Indonesia to serve in President Joko Widodo’s government. Now, under newly elected President Prabowo Subianto, she continues in her role, demonstrating an exceptional ability to maintain stability across different administrations.

Her tenure has been marked by decisive policies aimed at economic resilience. She strengthened Indonesia’s macroeconomic foundations, broadened the tax base, and curbed excessive subsidies. She also transformed the finance ministry, eliminating inefficiencies and corruption while raising governance standards. Through these efforts, Indrawati has won the confidence of both domestic and international investors.

Navigating Global Geopolitical Tensions

With deepening geopolitical divisions and increasing trade tensions between major powers, Indonesia finds itself at a crossroads. Indrawati acknowledges that geopolitical challenges are not new to Indonesia, recalling the country’s historical position in the Non-Aligned Movement during the Cold War.
Today, as a leading emerging economy, Indonesia is better positioned to influence global discussions and act as a bridge between superpowers. The country played a crucial role in promoting dialogue between the United States and China during its G20 presidency in 2022, even amidst the backdrop of the Ukraine conflict. Despite growing nationalism and inward-looking policies worldwide, Indonesia remains committed to fostering international cooperation, a principle enshrined in its constitution.

Economic Reforms: From Fragility to Strength

Indonesia’s economic resilience did not emerge by chance but through a series of well-planned reforms. The country, once labelled one of the “fragile five” economies, was vulnerable to currency fluctuations and global financial shocks. Indrawati’s policies focused on restoring macroeconomic stability, establishing an independent Central Bank, and implementing fiscal discipline to keep budget deficits and debt levels in check.

The Government also prioritised investments in infrastructure, such as roads, ports, and telecommunications, to boost competitiveness. Additionally, human capital development became a key focus, with 20 per cent of the national budget allocated to education. A scholarship fund has enabled 50,000 Indonesians to study at top global universities, preparing a skilled workforce for the future.

Through public-private partnerships and regulatory improvements, Indonesia has also enhanced its business and investment climate. These efforts have strengthened the country’s financial sector, reducing its vulnerability to economic crises.

Pioneering Industrial Policy and Sustainable Growth

One of Indonesia’s most significant economic strategies under Indrawati’s leadership has been its industrial policy, particularly in the extractive sector. The country, rich in natural resources, has sought to maximise the value of its mineral wealth.

Rather than allowing raw mineral exports, Indonesia has implemented a downstreaming policy, requiring companies to refine resources domestically. While some critics view export bans as protectionist, Indrawati argues that this policy strengthens the economy while ensuring profitability for investors. The Government has also provided incentives and improved infrastructure to create a business-friendly environment. As a result, Indonesia’s position in the global supply chain for industries such as electric vehicle batteries has been significantly enhanced.

Championing Reform in a Political Landscape

Despite lacking the backing of a major political party, Indrawati has successfully driven forward challenging reforms. Following the Asian financial crisis, the Indonesian public demanded a more accountable and transparent government. This momentum for change helped pave the way for reforms in taxation, State enterprises, and finance ministry operations.

However, resistance from vested interest groups was inevitable. Indrawati’s approach has been to engage in dialogue and build trust. She has actively communicated with sceptics, including politicians, bureaucrats, and civil society groups, to gain their support. Transparency and honesty, she believes, are key to successful reform.

Her engagement with the media has also played a crucial role in shaping public perception. By openly discussing policies with journalists and editors, she has built a strong narrative that supports her reform agenda. In a democratic nation with a free press, this strategy has been instrumental in countering opposition to change.

A Role Model for Women in Leadership

As one of the most prominent female leaders in Indonesia, Indrawati has become an inspiration for women across the country. When she first became Finance Minister in 2005, there were no women in top management positions at the ministry. Today, while still a minority, female representation in leadership has increased.

Indrawati acknowledges the challenges of being a public figure and the expectations placed on her. Balancing professional responsibilities with personal life requires discipline, but she remains committed to setting an example for others. She frequently receives questions from women on how to navigate careers and family life, and she embraces the opportunity to motivate and empower others.

Shaping the Future of Global Economic Governance

Beyond Indonesia, Indrawati is actively shaping discussions on the future of international financial institutions. As one of three external advisors to the IMF–World Bank Bretton Woods at 80 initiative, she is helping to redefine the role of these institutions in addressing modern global challenges.

She emphasises the need for the IMF and World Bank to adapt, moving beyond their traditional focus on financial stability to address issues such as climate change, digital transformation, and social protection. Moreover, she highlights the increasing influence of private sector players in global development, stressing the need for stronger collaboration between public and private institutions.

Conclusion

Sri Mulyani Indrawati’s leadership has been instrumental in Indonesia’s economic rise, from a fragile economy to a robust and dynamic global player. Her commitment to fiscal discipline, investment in human capital, and strategic industrial policies have strengthened the country’s foundations.

Beyond economic management, Indrawati has been a force for international cooperation, navigating geopolitical complexities while ensuring Indonesia remains competitive. As a role model for women and a key voice in global economic governance, her impact extends far beyond Indonesia’s borders.

With Indonesia continuing its upward trajectory, Indrawati’s leadership will remain critical in shaping the country’s economic future and its role in the evolving global order.
This article is based on an interview conducted by Nicholas Owen for the IMF’s Finance & Development magazine.

Key Takeaways

1. Indonesia’s Economic Transformation
• Over the past two decades, Indonesia has significantly improved its economy, increasing its GDP fourfold to $1.4 trillion.
• The poverty rate has drastically reduced, with less than 2% of the population living on less than $2.15 per day.
2. Macroeconomic Stability and Reform
• Establishing an independent Central Bank and consolidating financial sector supervision helped stabilise Indonesia’s economy.
• Prudent fiscal policies, infrastructure investment, and an improved business climate contributed to resilience.
3. Geopolitics and Indonesia’s Global Role
• Indonesia maintains a neutral stance in global conflicts, continuing its legacy as a founder of the Non-Aligned Movement.
• It played a key role in fostering US-China dialogue during its G20 presidency in 2022.
4. Industrial Policy and Economic Strategy
• Indonesia’s resource-based economy required strategic interventions, such as restricting raw material exports to encourage domestic value addition.
• The government supports foreign investors with incentives while ensuring they contribute to local industry growth.
5. Navigating Political Challenges and Reforms
• Reform efforts faced resistance from vested interests, but transparency, dialogue, and public engagement helped overcome opposition.
• Sri Mulyani Indrawati, Indonesia’s Minister of Finance, leveraged Indonesia’s democratic momentum and free press to build support for economic reforms.
6. The Role of Bretton Woods Institutions
• The IMF and World Bank must evolve to address modern challenges like climate change, digital technology, and social safety nets.
• Public-private partnerships are crucial for sustainable development.
7. Women in Leadership
• Sri Mulyani acknowledges the challenges women face in leadership but emphasises discipline, resilience, and leading by example.
• She serves as an inspiration for women in Indonesia, offering motivation through her experiences.