The writing is on the wall. The signs that Indonesia is not only facing its worst economic crisis since 1998 but also experiencing a multidimensional turmoil—marked by declining public trust and democratic backsliding—are everywhere.
Six months into Prabowo Subianto’s presidency, the hope for a new era of prosperity has all but vanished. Unless he takes drastic measures—such as delaying or even cancelling the controversial sovereign wealth fund Danantara and revising his free-meal program to be more efficient and effective while redirecting funds to boost the manufacturing sector rather than extractive industries—Indonesia is in free fall. He must also prioritize employment growth to stabilize the economy.
Additionally, Prabowo must launch an immediate investigation into his predecessor, Joko “Jokowi” Widodo, whose policies and actions have contributed to the crises Indonesia now faces. This includes holding Jokowi’s corrupt cronies accountable—many of whom remain in government. The president must replace these officials with individuals trusted by the markets. He must also abandon efforts to expand the military’s role in civilian affairs, withdraw the proposed amendments to military law, curb corruption, and strengthen law enforcement.
Failure to take these steps will leave Indonesia spiralling further into decline.
Unfortunately, judging by his statements and actions, expecting such decisive leadership from Prabowo may be wishful thinking.
The deepening economic crisis is evident across multiple indicators. The purchasing power of Indonesian citizens is declining as the manufacturing sector struggles to stay afloat, leading to massive layoffs nationwide. In January, Indonesia’s tax revenue was halved compared to the same period last year, reflecting lower earnings and weaker consumer spending.
The rapid depreciation of the Indonesian rupiah—down nearly 10% against the US dollar in just a few months—has made imports more expensive, fueling inflation. This has placed further strain on ordinary Indonesians, particularly as food prices soar. In key urban centers like Jakarta, Surabaya, and Medan, rising costs for essential goods have triggered public discontent, with small-scale protests emerging as workers and lower-income citizens struggle to afford basic necessities.
Meanwhile, Indonesia’s debt-to-GDP ratio has reached alarming levels, now exceeding 40%, as the country struggles to service massive foreign debts accumulated under the Jokowi administration. Much of this debt—taken on under the guise of infrastructure development—has failed to yield significant economic returns. Several state-owned projects continue to operate at a loss, with the Jakarta-Bandung high-speed rail serving as a glaring example of mismanaged priorities, running massively over budget and plagued by inefficiencies.
By the end of 2025, Indonesia’s public debt is projected to reach 10,000 trillion rupiah. How can the country meet this colossal obligation when even servicing its interest payments threatens to cripple the economy?
Investor confidence is crumbling. The Jakarta Composite Index (JCI) has suffered a historic drop, while foreign direct investment (FDI) has slowed significantly due to concerns over policy unpredictability and cronyism. Major corporations and international businesses are reconsidering their expansion plans in Indonesia, with some already relocating operations to more stable markets in Southeast Asia, such as Vietnam and the Philippines. The banking sector is also under pressure, with non-performing loans rising sharply, threatening the stability of Indonesia’s financial system.
The economic downturn is exacerbated by deteriorating governance. Prabowo’s policies have done little to instill confidence among domestic or international stakeholders. His flagship free-meal program for students, while seemingly benevolent, lacks clear funding mechanisms and oversight, raising concerns about potential corruption. Simultaneously, his administration has allocated billions to establish Danantara, a new economic entity that places control of significant state funds into the hands of Prabowo’s allies, heightening fears of systemic corruption.
More alarming than the economic collapse is the concurrent erosion of democratic institutions and civil liberties. The recently amended military law, which expands the role of active-duty military personnel in civilian governance, signals a dangerous regression to the militaristic tendencies of the New Order era. This shift undermines civilian control of government institutions and risks enabling the suppression of political dissent. Reports have already surfaced of military personnel being appointed to key bureaucratic positions, raising concerns that democratic decision-making will be overridden by authoritarian command structures.
Furthermore, the Indonesian National Armed Forces (TNI) have begun reasserting their presence in civilian affairs, including law enforcement, policymaking, and economic management. History has shown the consequences of such military entrenchment: under Suharto’s regime, military intervention in politics led to widespread human rights violations, suppression of free speech, and systemic corruption. By reviving these militaristic policies, Prabowo risks undoing decades of democratic progress.
The fact that lawmakers convened to deliberate the TNI Law at a five-star hotel under heavy military guard—rather than police protection—demonstrates that the TNI is already at the center of power. The police, who allegedly played a role in securing Prabowo’s victory in the 2024 presidential election, likely now regret their partisanship. Mockingly labeled the “Brown Party” (“Partai Coklat” or “Parcok,” referring to their brown uniforms) for their support of Prabowo, the police risk being sidelined as a second-class institution while the military consolidates control—reminiscent of the New Order era.
Freedom of expression is under siege as well. The government has intensified crackdowns on opposition
voices, with activists, journalists, and academics facing intimidation or legal action under increasingly draconian laws. Digital censorship is expanding, with authorities leveraging cybersecurity regulations to silence critics on social media, further restricting public discourse and transparency.
The convergence of economic collapse, political instability, and military overreach suggests that Indonesia is on the brink of a crisis not seen since the financial and political turmoil of 1997-1998. If immediate corrective measures—such as restoring fiscal discipline, ensuring accountability in governance, and upholding democratic principles—are not taken, the country risks descending into an era of prolonged instability. The warning signs are clear: Indonesia stands at a critical juncture, and failure to address these pressing issues could lead to widespread unrest and a return to authoritarian rule.
