Sjafruddin Prawiranegara

• 1. Introduction

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  Sjafruddin Prawiranegara kept Indonesia alive when its president and vice president were in Dutch captivity. On the 19th of December 1948, Dutch forces swept into Yogyakarta and captured Sukarno and Hatta in a single day. The Indonesian republic, barely three years old, seemed to have vanished overnight. What the Dutch did not count on was a tax inspector's son from Banten, hiding in a jungle village in West Sumatra, who refused to let it.

• 2. Roots and Formation

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  Sjafruddin was born on the 28th of February 1911 in Anyer Kidul, in what is now Serang Regency, Banten. His father, R. Arsyad Prawiraatmadja, was a district chief from a family of colonial officials, and his maternal great-grandfather was descended from royalty in the Pagaruyung Kingdom, exiled to Banten after the Padri War.

  He attended a Europeesche Lagere School in Serang, then a Meer Uitgebreid Lager Onderwijs in Madiun, and graduated from an Algemene Middelbare School in Bandung in 1931. He had hoped to study in Leiden, but his family could not afford it. He enrolled instead at the Rechts Hogeschool in Batavia, earning his law degree in September 1939.

  During his years in Batavia he founded the Unitas Studiosorum Indonesiensis, a student organization that deliberately avoided radical politics, distinct from the more confrontational Perhimpoenan Peladjar-Peladjar Indonesia. After graduating he edited the newspaper Soeara Timur and chaired the Perserikatan Perkumpulan Radio Ketimuran from 1940 to 1941. He took a position as a tax inspector's adjutant in Kediri, and when Japan occupied the Dutch East Indies in 1942, he was promoted to head of the Kediri tax office before being relocated to Bandung.

  The occupation sharpened his convictions. He began visiting Sutan Sjahrir, the key underground resistance leader, and alongside Mohammad Natsir he organized discreet educational courses aimed against the Japanese. By the time independence was proclaimed, Sjafruddin had become part of the inner circle of those who would govern the new republic.

• 3. Finance Minister in Revolution

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  Indonesian independence was proclaimed on the 17th of August 1945, and within days Sjafruddin joined the Central Indonesian National Committee, becoming a member of its Working Committee. Sjahrir had offered him the finance portfolio in his first cabinet, but Sjafruddin declined, citing his own inexperience. He accepted the deputy role from the 12th of March 1946, then rose to full Minister of Finance in Sjahrir's third cabinet from the 2nd of October 1946 until the 27th of June 1947.

  One of his decisive early acts was persuading Vice President Hatta to issue the Oeang Republik Indonesia, the predecessor currency to the modern rupiah. Hatta hesitated, and Sjafruddin's argument was blunt: if Hatta were caught by the Dutch, he would be hanged not as a forger but as a rebel. Sjafruddin became the first Indonesian finance minister to distribute the currency in late 1946, though the banknotes carried the signature of Alexander Andries Maramis, who had organized the printing the previous year.

  At the Economic Council for Asia and the Far East in Manila in 1947, Sjafruddin learned that the international community suspected the Indonesian revolutionaries of being communists. He returned and published a pamphlet, Politik dan Revolusi Kita, in mid-1948 to clarify the unusual alliance between Masyumi and the Indonesian Communist Party. Alongside that clarifying work, he publicly criticized the Pemuda youth groups for pressuring the government with demands he considered reckless, going so far as to call leaders who urged fighters to attack Allied forces with bamboo spears 'criminal'. He praised Lenin and Stalin not as ideological models but as 'realists', placing pragmatism above revolutionary theatrics.

• 4. The Emergency Government

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  The contingency plan for an emergency government had been forming since May 1948, when Hatta began relocating military and civilian officers to Bukittinggi at the advice of lieutenant colonel Daan Jahja. Jahja had argued that Central Java was too small and densely populated to serve as an emergency center of power. In November, Hatta brought Sjafruddin to Bukittinggi to begin preparing the groundwork.

  When Dutch forces seized Yogyakarta on the 19th of December and captured both Sukarno and Hatta, Sjafruddin was initially unable to believe that the government had collapsed so quickly. Dutch aircraft flew low over Bukittinggi while he convened a meeting with local Republican officials, forcing the group to retreat inland toward the town of Halaban. There, on the 22nd of December, he announced the formation of the Emergency Government of the Republic of Indonesia, known by its Indonesian initials PDRI, with himself as head.

  Sjafruddin chose the title "Head" rather than "President" because Sukarno's mandate had not yet reached him by that date. He simultaneously held the portfolios of defense, foreign affairs, and information. The Dutch captured Bukittinggi and Payakumbuh the same day, compelling the PDRI to keep moving. Plans to relocate to Pekanbaru were defeated by Dutch air attacks and difficult roads; the group briefly split at Sungai Dareh, then regrouped at the village of Bidar Alam, near Jambi. Sjafruddin arrived there on the 9th of January 1949.

  From Bidar Alam, using a generator-powered radio transmitter of the Indonesian Air Force, Sjafruddin maintained contact with the outside world - congratulating Jawaharlal Nehru on his inauguration as Indian Prime Minister - while keeping dispersed Republican fighters unified under a single authority. He established a supply section that traded agricultural products and opium to the Malay Peninsula to fund guerrilla units. On the 14th of January 1949, Sjafruddin and a large number of PDRI leaders attended a meeting at the village of Situjuh Batur. He left after the meeting; those who stayed the night were killed in a Dutch ambush at dawn the next day.

  The PDRI's survival denied the Dutch the propaganda victory of presenting the UN with a fait accompli: a republic with no functioning government. Sjafruddin directed the Indonesian delegation at the UN, and this coordination gave the negotiator Mohammad Roem a strong bargaining position. Sjafruddin would later return his governing mandate to Sukarno in Yogyakarta on the 13th of July 1949, after being persuaded to accept the terms of the Roem-Van Roijen Agreement at his hideout in the village of Padang Japang by Natsir, Johannes Leimena, and Abdul Halim.

• 5. The Sjafruddin Cut

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  When Sjafruddin returned to the finance ministry after independence, Indonesia was carrying the debt imposed by the Dutch-Indonesian Round Table Conference, and three separate currencies were circulating at once: notes from the Republican government, notes from the Netherlands Indies Civil Administration, and notes from the pre-occupation Bank of Java. The economy was plagued by inflation driven by too much money chasing too few goods.

  On the 10th of March 1950, Sjafruddin announced that all NICA and Bank of Java notes with a face value above five guilders were to be physically cut in half. The left halves remained legal tender until the 9th of April at half their face value and could be exchanged for new notes; the right halves were exchanged for 30-year government bonds yielding three percent. The same principle applied to bank accounts: half of all balances, with an exemption for the first 200 guilders on accounts below 1,000 guilders, were transferred into a government loan account.

  The Bank of Java later reported that the policy reduced the money supply by 41 percent. Sjafruddin argued in a later interview that beyond controlling inflation, the measure also created uniform legal tender across the entire country and purged Dutch currency from circulation. But the policy was politically brutal. It drew constant attacks from the PKI and generated lasting controversy because the order was dated at the end of the month, when most salaried workers were still holding their wages in cash.

  Sjafruddin paired this blunt monetary surgery with a foreign exchange certificate system that required exporters to obtain certificates before engaging in imports. He also refused to raise civil servants' salaries, retained an unpopular colonial-era tax, and rejected calls to fund political parties. His time as minister saw government income rise but the deficit persist, partly because expenses climbed alongside revenues. A subsequent boom from the Korean War would eventually produce a budget surplus under the Natsir Cabinet.

• 6. Central Banker, Ideological Opponent

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  On the 30th of April 1951, the Bank of Java was nationalized and converted from a joint-stock company into a public body. Sjafruddin had opposed the nationalization on the grounds that Indonesian staff lacked the experience to manage it. Despite his opposition, on the 15th of July he was appointed inaugural governor of the new central bank, later named Bank Indonesia, to replace the resigning Dutch governor A. Houwink.

  He took the post reluctantly, having planned to retire to the private sector to fund his children's education. He accepted only on the condition that his salary and those of other Indonesian employees would match the pay of the departing Dutch staff. Houwink, whose own views aligned closely with Sjafruddin's on monetary conservatism, reportedly approved of the appointment.

  Sjafruddin's first annual report argued for the bank to continue commercial banking activities, citing the shortage of banking access and the absence of a capital market in Indonesia. He also designed a clause requiring the bank to maintain gold and foreign currency reserves at 20 percent of currency issued, which drew criticism from the economist Sumitro Djojohadikusumo, then serving as Finance Minister.

  Their debate extended into the pages of the Dutch-language newspaper Nieuwsgier in 1952. Sumitro favored state intervention to build an industrial base and supported positive discrimination for indigenous Indonesians in business. Sjafruddin argued that Chinese Indonesian entrepreneurs who kept their profits in the country qualified as "domestic" capital. He viewed Sumitro's Benteng program as forcing industrialization before Indonesians had acquired the managerial and technical skills needed to run new industries. Both men nonetheless agreed that attracting foreign investment was necessary, putting them in a minority position within Indonesian politics at the time.

  In 1956, approaching the end of his first term, the Indonesian National Party proposed replacing him with PNI member Lukman Hakim. He kept his post after Nahdlatul Ulama backed his second term, assisted by favors that fellow Masyumi member and finance minister Wibisono had extended to NU-related businesses.

• 7. Rebellion and Aftermath

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  By late 1957, anti-Dutch sentiment had hardened following Dutch success in blocking the West New Guinea dispute from the United Nations General Assembly on the 29th of November. Sukarno ordered labor unions and army units to seize Dutch businesses. Sjafruddin, along with Masyumi leaders Natsir and Burhanuddin Harahap, was subjected to accusations in the press of links to an assassination attempt on Sukarno at Cikini on the 30th of November, since some of the assailants were members of Masyumi's youth wing. Harassed by phone calls and paramilitary groups affiliated with PNI and PKI, all three fled Jakarta by January 1958.

  On the way to Padang, Sjafruddin met with dissident officers including Maludin Simbolon. He also wrote an open letter to Sukarno describing Guided Democracy as "fascist" and calling for a return to the 1945 Constitution. In a second letter dated the 23rd of January, he admitted openly that he had fled Jakarta, writing that "he was not ready to die stupidly". On the 1st of February he was removed from his position as Bank Indonesia governor by Presidential Order.

  On the 15th of February 1958, Lt. Col Ahmad Husein declared the Revolutionary Government of the Republic of Indonesia, the PRRI, in Padang, naming Sjafruddin prime minister and finance minister. Sjafruddin later wrote that he had refused to sign the declaration itself, wanting to make clear the movement was not his initiative. He had previously tried to persuade the military officers to exercise restraint. Within weeks, aerial attacks struck West Sumatra, and by April the government had taken Padang with little resistance. By the 5th of May, the PRRI capital at Bukittinggi had fallen.

  Sjafruddin refused to negotiate and vowed to remain in the jungle. On the first anniversary of PRRI, he gave a speech attacking Sukarno's alignment with communists and calling for a federal state. At Bonjol on the 8th of February 1960, the civilian and military leadership proclaimed a "United Republic of Indonesia" and named Sjafruddin its president, but the gesture had no military effect. By July, the rebel stronghold at Koto Tinggi had been overrun.

  Sjafruddin surrendered alongside Assaat and Burhanuddin Harahap near Padangsidimpuan on the 25th of August 1961, after broadcasting a radio message on the 17th of August urging his remaining followers to cease hostilities. He also surrendered 29 kilograms of gold bullion from PRRI's assets. Natsir held out until the 25th of September, ending the rebellion entirely.

  Despite an amnesty declaration, Sjafruddin was brought to Jakarta in March 1962, held in Kedu for two years, then transferred to a military prison in 1964. He was released on the 26th of July 1966, after Suharto's New Order came to power.

• 8. Conscience Under the New Order

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  Released from prison, Sjafruddin found that the Indonesian Army had blocked the rehabilitation of Masyumi. He left active politics and turned to religious organizations, including the Indonesian Pesantren Foundation and the Mubaligh Corps. In July 1967 he founded the Indonesian Association of Muslim Businessmen and generally supported the economic technocrats around Suharto, including Widjojo Nitisastro and Mohammad Sadli.

  He used Friday mosque sermons to preach against corruption and opposed the government monopoly on hajj pilgrimages as inefficient and prone to fraud. In 1970 he founded a hajj association to let pilgrims save independently outside the official route. The organization succeeded for a time, but financial mismanagement led to around 300 pilgrims being stranded in Mecca in 1976, requiring a government rescue.

  In 1980 he joined the "Petition of Fifty" opposition group alongside former PRRI colleagues Natsir and Harahap, and retired generals including Nasution, Ali Sadikin, and Hoegeng Iman Santoso. The petition challenged the armed forces' collaboration with Golkar, Suharto's accumulation of wealth, and the government's use of Pancasila as a political weapon. Sjafruddin accepted Pancasila as a founding principle for the state but could not accept its extension to all social and political organizations. On the 7th of July 1983 he wrote a widely circulated open letter to Suharto opposing a draft law that would enforce this extension, arguing from Sukarno's own 1945 speech that Pancasila's emphasis on gotong-royong implied that participants in the state should retain their own distinct identities.

  Following the Tanjung Priok riots and massacre of 1984, he was a co-author of a white paper attributing the violence to government policy. Suharto responded by banning him from leaving the country except for medical treatment. He was still investigated in June 1985 after giving a sermon at a mosque in Tanjung Priok. He was also detained briefly in April 1978 for earlier criticism of the government.

  Sjafruddin died of a heart attack in Jakarta on the 15th of February 1989, collapsing at home around 6 pm and dying at Pondok Indah Hospital. He was buried at Tanah Kusir Cemetery in South Jakarta. Journalist Rosihan Anwar quoted him saying, shortly before his death, that Indonesia was being colonized by itself. George McTurnan Kahin, writing his obituary, stated that Sjafruddin was "never tainted by corruption" and had a "reputation for honesty, forthrightness, and solid integrity". On the 8th of November 2011, President Susilo Bambang Yudhoyono declared him a National Hero of Indonesia, after two previous proposals had been rejected because of his PRRI involvement. One of the two buildings at Bank Indonesia's headquarters now bears his name.