Entering the second week of June 2026, Indonesia\u2019s financial market\npresented a tense and confusing drama. On 8 June, the rupiah plunged\npast Rp18,100 per US dollar, the weakest level in history, and\nyear-to-date the Garuda currency has lost nearly nine per cent of its\nvalue, making it one of the worst performers in Asia. The Composite\nStock Price Index (IHSG) even briefly hit its yearly low at around\n5,317, plummeting about 35 per cent in six months, and for a moment held\nthe status of the world\u2019s worst-performing bourse. However, on 9 and 10\nJune, a sharp reversal occurred. The IHSG soared 7.57 per cent, then\nfollowed up with a 2.71 per cent rise to 5,902, whilst the rupiah\ncrawled back to around Rp17,900 per US dollar.<\/p>\n
The trigger was a surprise 25 basis point BI Rate hike to 5.50 per\ncent in an out-of-schedule meeting, coupled with discourse on\nstate-owned enterprise share buybacks. The question then is: does this\nsurge signal that the storm has passed, or is it merely a pause amidst\nmuch deeper issues?<\/p>\n
The Insan Cita Professors\u2019 Forum (8\/6\/26), through presentations by\nprofessors and economic and monetary experts, concluded that what we are\nfacing is currently a yellow light, not a red one. The fundamental\nfoundation of banking has not yet been shaken, inflation is still under\ncontrol, and foreign exchange reserves are sufficient for about six\nmonths of imports, holding steady so far. What has truly occurred is a\nmarket confidence crisis, not a full-blown economic crisis like\n1997\/1998. The two-day rebound is more accurately read as a relief\nrally: panic subsided momentarily, but the source of anxiety has not\ndisappeared. Market players remain wary of capital outflows and the\npersistent shadow of fiscal risk premium.<\/p>\n
The root of the turmoil lies in capital flows. Foreign investors sold\noff shares massively at the start of June, with a recorded net sell of\nover Rp1 trillion in a single day\u2014triggered by concerns over fiscal\npolicy direction, central bank independence, and capital market\ntransparency. Downgraded outlooks from Moody\u2019s and Fitch worsened\nsentiment.<\/p>\n
Capital outflow is not just a figure on the stock exchange screen; it\npressures the rupiah, raises raw material import costs, and ultimately\nerodes the real sector. When the rupiah weakens, industries dependent on\nimported components face soaring production costs, squeezed margins, and\ndeclining productivity. This is what economists fear: financial symptoms\nspreading to the heart of the productive economy.<\/p>\n
This transmission is now palpable. Starting 10 June 2026, following a\nsurge in world oil prices due to conflict in the Middle East,\nnon-subsidised fuel prices were raised significantly: Pertamax (RON 92)\nrose 32 per cent to Rp16,250 per litre, and Pertamax Green 95 rose\nnearly 32 per cent to Rp17,000 per litre. The government held Pertalite\nand Biosolar prices to protect the purchasing power of vulnerable\ngroups. However, the non-subsidised fuel price hike still risks\nspreading to logistics costs, food prices, and consumer goods\u2014a domino\neffect that economist Chatib Basri warned is a direct consequence of the\nrupiah\u2019s weakening.<\/p>\n
For households, this is the most tangible face of the crisis: not\nexchange rate charts, but market prices. The main concern is not merely\ntemporary inflation, but the inflation expectations that could form if\nenergy price increases are perceived as continuing. Once these\nexpectations harden, business owners and traders tend to raise prices\npre-emptively, making the cost spiral increasingly difficult to tame\u2014a\npressure that erodes the purchasing power of the middle class, which is\nprecisely the backbone of national consumption.<\/p>\n
So, has Bank Indonesia\u2019s move been appropriate? In the short term,\nBI\u2019s response can be deemed agile. After raising interest rates by 50\nbasis points in May\u2014the first increase since 2022\u2014BI again surprised the\nmarket by raising the BI Rate by 25 basis points to 5.50 per cent on 9\nJune, accompanied by massive intervention in the foreign exchange market\nand a Seven Strategic Steps package to strengthen the rupiah. Governor\nPerry Warjiyo asserted this move was aimed at stabilising the exchange\nrate amidst global turmoil and maintaining inflation within the 2.5 per\ncent plus or minus 1 per cent target. The positive market response\u2014the\nrupiah strengthening and the IHSG rallying\u2014indicates this policy at\nleast succeeded in calming short-term panic.<\/p>\n
However, herein lies its limitation. High interest rates do attract\nportfolio capital back, but simultaneously burden businesses and credit\ncosts\u2014precisely when the real sector is sluggish. The May experience\nprovided an important lesson: BI had already raised rates and\nintervened, yet the rupiah continued to weaken. This means that monetary\npolicy essentially only buys time. As long as the root problems such as\ntrust in fiscal governance and institutions remain unaddressed, monetary\nstabilisation only suppresses the symptoms, not cures the disease. In\nfact, the public questioning of BI\u2019s independence has become part of the\ntrust problem itself.<\/p>\n
The Insan Cita Professors\u2019 Forum underscored that stabilising the\nexchange rate and stock index alone is not enough. Indonesia\u2019s problems\nare structural: a current account deficit due to dependence on energy\nand food imports; deindustrialisation shrinking manufacturing\u2019s\ncontribution from 18.4 to 16.9 per cent of GDP, whilst Vietnam\naccelerates; and extreme inequality, where a handful of accounts control\nthe majority of banking deposits and around one per cent of people\ncontrol most of the land. Overarching all this looms governance issues:\njumbo budget allocations with weak oversight and concerns over\noligarchic dominance. Without fixing this foundation, every rebound will\nbe temporary only. Data from the forum even showed near-extreme\ninequality: about 1.25 per cent of accounts control more than 80 per\ncent of total banking deposits.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/rupiah-slumps-ihsg-staggers-treating-the-root-not-just-the-symptoms-an-islamic-economic-solution-1781153720", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }