Infobank
INDONESIA’S economy lately has felt feverish, its temperature rising and falling unpredictably. Government officials have been busy reassuring the world: this country remains strong. The Minister of Finance says the state budget is solid, backed by fiscal reserves of Rp420 trillion. The Financial Services Authority (OJK) showcases the results of banking stress tests, claiming national resilience remains robust. Rating agencies are still loyal to Indonesia’s sovereign credit rating. The Governor of Bank Indonesia is highly optimistic about the rupiah.
But we cannot avoid one question: doesn’t this resemble 1997? Weren’t the nation’s top officials back then also busy reassuring the markets and the people, while an economic time bomb kept ticking beneath the grand-looking stage floor?
Frankly, this article is not intended to sound the alarm. Indonesia is not exactly standing at the edge of a cliff yet. But according to Prof. Mohamad Ikhsan, senior economist at the University of Indonesia, the country is heading in that direction, slowly, but unmistakably. What is worrying is this: our eyes may be too fixated on comforting macroeconomic figures, while our ears have gone deaf to the whispers of history beginning to blow once again.
Authorities often say the national banking sector is healthy. The capital adequacy ratio (CAR) has reached 25.87%, far above the minimum threshold. The non-performing loan (NPL) ratio has been maintained at around 2.2%. Liquidity is strong. Third-party funds (DPK) have grown by 13.55%. Looking at these numbers, the financial sector appears like a steel fortress.
But herein lies the great irony: superficial health on the surface often conceals structural fragility underneath.
Take one simple example. Amid the rupiah’s turmoil, approaching Rp18,000 per US dollar, Bank Indonesia (BI) has carried out massive foreign exchange interventions. Foreign exchange reserves have fallen from around US$146.2 billion. The BI Governor described the intervention as no longer business as usual, it has already gone all out.
Even more worrying: bad loans will emerge from the palm oil sector and its downstream industries, as well as mineral mining and its derivative industries. The seizure of oil palm plantations deemed to violate regulations also carries the potential for defaults. The shift to a single-gate export policy has seriously disrupted banking because debtors are being affected. These changing conditions are time bombs planted within our banking system.
Recall Mohamad Ikhsan’s account: how Habibie once firmly halted the IPTN project, his own pride and joy, to save the country. He sacrificed his personal agenda because he understood that reform credibility required sacrifice. No one believes in half-hearted reform that protects the president’s favorite projects.
Today, we are witnessing massive fiscal expansion. The Free Nutritious Meals (MBG) program and the construction of 80,000 Red-andWhite Village Cooperatives are estimated to cost US$18 billion or Rp314 trillion this year. The 2025 state budget deficit stands at 2.92% of GDP, dangerously close to the 3% limit mandated by law. Fitch Ratings even revised Indonesia’s outlook to negative in March 2026 due to concerns over fiscal discipline and policy uncertainty.
Frankly, this is not to say those programs are unimportant. But the question remains: where is the courage to say “delay” or “scale down”? Where is the sacrifice of personal agendas like Habibie demonstrated? Or are we repeating the old pattern, prestige projects continue despite narrowing fiscal space, despite warnings from rating agencies, despite investors beginning to grow uneasy?
One thing must never be forgotten: financial markets do not care about nationalist rhetoric or “blaming foreigners.” Markets care about only one thing: whether the elite respect the rules of the game.
Crises never come from the indicators we monitor. They come from the corners we ignore. In 1997, we ignored swelling private debt. In 2008, the world ignored subprime mortgages. Today, we are ignoring risk making in banking and hidden deficits outside the state budget.
Indonesia is not yet at the cliff’s edge. Foreign exchange reserves are still adequate. Economic growth remains around 5.61%. But the window to avoid the undesirable is closing. Every month. Every day
Habibie showed that wholehearted reform is possible. Megawati showed that continuing reforms, even without popularity, is possible. SBY showed that the results are real.
Frankly, we hope the government chooses the former. But history does not remain silent. It is whispering. And we fear, hopefully this fear proves unfounded, that we are too busy covering our ears with comforting numbers while those whispers grow louder into screams.
The main issue now is no longer merely about economic indicators, but about eroding market confidence. At any moment, that confidence could crush the economy and ultimately blow up the banking sector. Hopefully, this assumption is wrong.
But we cannot avoid one question: doesn’t this resemble 1997? Weren’t the nation’s top officials back then also busy reassuring the markets and the people, while an economic time bomb kept ticking beneath the grand-looking stage floor?
