Indonesia's financial markets were shaken after Finance Minister Sri Mulyani Indrawati was fired in a cabinet reshuffle, triggering an immediate drop in stock markets, currency values and investor sentiment.
The Jakarta Composite Index fell sharply by around 1.6%, indicating a negative market reaction to the dismissal of the key position.
In addition, the rupiah also weakened by more than 1%, forcing Bank Indonesia to intervene in an effort to stabilize the situation.
Investors are likely to view the sudden move as a threat to the credibility of the country's fiscal policy, especially as President Prabowo Subianto is expected to focus more on populist programs that could potentially add to the deficit burden, including a large-scale free food initiative.
The appointment of his successor, Purbaya Yudhi Sadewa, an economist and head of the Deposit Insurance Corporation, is yet to restore market confidence in the near term.
The public protests, which have been covered by the world's media, have triggered an outflow of foreign capital, adding to pressure on the rupiah and the local bond market.
Overall, the dismissal of Sri Mulyani, a beacon of international confidence, fueled concerns that Indonesia could face short-term economic and fiscal instability if new policies do not show the same continuity and courage.
