By Eko B. Supriyanto, Editor-in-Chief of Infobank Media Group
Indonesia’s economy has been like a fever lately, with its temperature fluctuating. Officials are busy assuring the world that the country is strong. The Minister of Finance describes the state budget as solid, with fiscal reserves of Rp420 trillion. The Financial Services Authority (OJK) has showcased the results of banking stress tests, stating that the nation’s resilience remains strong. Credit rating agencies remain steadfast in their debt ratings. The Governor of Bank Indonesia (BI) is very optimistic about the rupiah. The market is reassured. The people are reassured.
But we cannot avoid one question: doesn’t this resemble 1997? Didn’t the nation’s leaders back then also busy themselves reassuring the market and the people, while an economic time bomb continued ticking beneath the seemingly grand stage?
Honestly, this article isn’t meant to sound the alarm. Indonesia isn’t exactly on the brink of a cliff yet. But, according to Prof. Mohamad Ikhsan, a senior economist at the University of Indonesia, the country is heading in that direction—slowly, but surely. What’s concerning: our eyes may be fixated on the reassuring macroeconomic figures, while our ears are deaf to the whispers of history that are beginning to blow again.
Authorities often describe the national banking sector as healthy. The capital adequacy ratio (CAR) stands at 25.87 percent, well above the minimum threshold. The non-performing loan (NPL) ratio has been kept in check at around 2.2 percent. Liquidity is strong. Third-party funds (DPK) grew by 13.55 percent. Looking at these figures, the financial sector appears to be a fortress of steel.
But here lies the great irony: the apparent health on the surface often hides structural fragility beneath.
Take a simple example. Amid the rupiah’s volatility, which has approached the Rp18,000 mark per U.S. dollar, the Bank of Indonesia (BI) has carried out massive foreign exchange interventions. Foreign exchange reserves have dropped from around USD146.2 billion. The BI Governor stated that this intervention is not business as usual; it is an all-out effort.
What is even more concerning: non-performing loans will emerge from the palm oil sector and its derivatives, as well as from mineral mines and their derivatives. Even the seizure of palm oil plantations deemed to be in violation carries the potential for loan defaults. The shift to a single-window export policy is severely disrupting the banking sector because borrowers are bearing the brunt of the impact. These changing conditions are a ticking time bomb embedded within our banking system.
Recall Mohamad Ikhsan’s account: how Habibie once decisively halted the IPTN project—his own pride and joy—to save the nation. He sacrificed his personal agenda because he knew that the credibility of reform demanded sacrifice. No one trusts half-hearted reform that shields the president’s favorite projects.
These days we are witnessing massive fiscal expansion. The Free Nutritious Meals (MBG) program and the construction of 80,000 Merah Putih Village Cooperatives are estimated to cost USD18 billion or Rp314 trillion this year. The 2025 state budget deficit stands at 2.92 percent of GDP, very close to the 3 percent limit set by law. Fitch Ratings even revised Indonesia’s outlook to negative in March 2026 due to concerns over fiscal discipline and policy uncertainty.
Honestly, I’m not saying those programs aren’t important. But the question remains: where is the courage to say “postpone” or “scale back”? Where is the willingness to sacrifice personal agendas, as Habibie did? Or are we repeating old patterns, with prestige projects continuing even as fiscal space shrinks, even as rating agencies issue warnings, and even as investors begin to grow anxious?
One thing must not be forgotten: financial markets don’t care about nationalist rhetoric or “blaming foreigners.” The market cares about only one thing: do the elites respect the rules of the game?
Crises never come from the indicators we monitor. They come from the corners we overlook. In 1997, we ignored ballooning private debt. In 2008, the world ignored subprime mortgages. Today, we are ignoring risk masking in the banking sector and hidden deficits outside the state budget. This is our concern.
Indonesia is not yet on the brink. Foreign exchange reserves are still sufficient. Economic growth remains around 5.61 percent. But the window to avoid the undesirable is closing. Every month. Every day.
Habibie demonstrated that wholehearted reform is possible. Megawati demonstrated that continuing reform, even without popularity, is possible. SBY demonstrated tangible results.
The question is: do we have the courage to do it—wholeheartedly, consistently, and with real sacrifice? Or will we let history write yet another chapter of avoidable collective folly?
Honestly, I hope the government chooses the former. But history does not stand still. It is whispering. And we fear—though we hope it does not come to pass—that we are busy plugging our ears with soothing numbers, while that whisper grows louder into a scream.
The main issue now is not about economic indicators, but rather the eroding market confidence. At any moment, that confidence could crush the economy and ultimately bring down the banking system. Let us hope this prediction is wrong. (*)
Indonesia on the Brink: Between “Illusory” Stability and a Banking Time Bomb
By Eko B. Supriyanto, Editor-in-Chief of Infobank Media Group
Indonesia’s economy has been like a fever lately, with its temperature fluctuating. Officials are busy assuring the world that the country is strong. The Minister of Finance describes the state budget as solid, with fiscal reserves of Rp420 trillion. The Financial Services Authority (OJK) has showcased the results of banking stress tests, stating that the nation’s resilience remains strong. Credit rating agencies remain steadfast in their debt ratings. The Governor of Bank Indonesia (BI) is very optimistic about the rupiah. The market is reassured. The people are reassured.
But we cannot avoid one question: doesn’t this resemble 1997? Didn’t the nation’s leaders back then also busy themselves reassuring the market and the people, while an economic time bomb continued ticking beneath the seemingly grand stage?
Honestly, this article isn’t meant to sound the alarm. Indonesia isn’t exactly on the brink of a cliff yet. But, according to Prof. Mohamad Ikhsan, a senior economist at the University of Indonesia, the country is heading in that direction—slowly, but surely. What’s concerning: our eyes may be fixated on the reassuring macroeconomic figures, while our ears are deaf to the whispers of history that are beginning to blow again.
Authorities often describe the national banking sector as healthy. The capital adequacy ratio (CAR) stands at 25.87 percent, well above the minimum threshold. The non-performing loan (NPL) ratio has been kept in check at around 2.2 percent. Liquidity is strong. Third-party funds (DPK) grew by 13.55 percent. Looking at these figures, the financial sector appears to be a fortress of steel.
But here lies the great irony: the apparent health on the surface often hides structural fragility beneath.
Take a simple example. Amid the rupiah’s volatility, which has approached the Rp18,000 mark per U.S. dollar, the Bank of Indonesia (BI) has carried out massive foreign exchange interventions. Foreign exchange reserves have dropped from around USD146.2 billion. The BI Governor stated that this intervention is not business as usual; it is an all-out effort.
What is even more concerning: non-performing loans will emerge from the palm oil sector and its derivatives, as well as from mineral mines and their derivatives. Even the seizure of palm oil plantations deemed to be in violation carries the potential for loan defaults. The shift to a single-window export policy is severely disrupting the banking sector because borrowers are bearing the brunt of the impact. These changing conditions are a ticking time bomb embedded within our banking system.
Recall Mohamad Ikhsan’s account: how Habibie once decisively halted the IPTN project—his own pride and joy—to save the nation. He sacrificed his personal agenda because he knew that the credibility of reform demanded sacrifice. No one trusts half-hearted reform that shields the president’s favorite projects.
These days we are witnessing massive fiscal expansion. The Free Nutritious Meals (MBG) program and the construction of 80,000 Merah Putih Village Cooperatives are estimated to cost USD18 billion or Rp314 trillion this year. The 2025 state budget deficit stands at 2.92 percent of GDP, very close to the 3 percent limit set by law. Fitch Ratings even revised Indonesia’s outlook to negative in March 2026 due to concerns over fiscal discipline and policy uncertainty.
Honestly, I’m not saying those programs aren’t important. But the question remains: where is the courage to say “postpone” or “scale back”? Where is the willingness to sacrifice personal agendas, as Habibie did? Or are we repeating old patterns, with prestige projects continuing even as fiscal space shrinks, even as rating agencies issue warnings, and even as investors begin to grow anxious?
One thing must not be forgotten: financial markets don’t care about nationalist rhetoric or “blaming foreigners.” The market cares about only one thing: do the elites respect the rules of the game?
Crises never come from the indicators we monitor. They come from the corners we overlook. In 1997, we ignored ballooning private debt. In 2008, the world ignored subprime mortgages. Today, we are ignoring risk masking in the banking sector and hidden deficits outside the state budget. This is our concern.
Indonesia is not yet on the brink. Foreign exchange reserves are still sufficient. Economic growth remains around 5.61 percent. But the window to avoid the undesirable is closing. Every month. Every day.
Habibie demonstrated that wholehearted reform is possible. Megawati demonstrated that continuing reform, even without popularity, is possible. SBY demonstrated tangible results.
The question is: do we have the courage to do it—wholeheartedly, consistently, and with real sacrifice? Or will we let history write yet another chapter of avoidable collective folly?
Honestly, I hope the government chooses the former. But history does not stand still. It is whispering. And we fear—though we hope it does not come to pass—that we are busy plugging our ears with soothing numbers, while that whisper grows louder into a scream.
The main issue now is not about economic indicators, but rather the eroding market confidence. At any moment, that confidence could crush the economy and ultimately bring down the banking system. Let us hope this prediction is wrong. (*)
