BI Analysis on Global Conditions to Dollar Flight from Indonesia

Jakarta, CNBC Indonesia - Bank Indonesia Governor Perry Warjiyo has outlined the current volatile global situation stemming from the war in the Middle East.

Perry stated that the global situation is worsening and is exerting negative effects on the global economy and finance. He made these remarks during a meeting with Commission XI of the Indonesian House of Representatives on Wednesday (8/4/2026).

“Several recent developments that we indeed need to report because the world’s condition is deteriorating amid reciprocal tariff policies and the war between the United States, Israel, and Iran, which we already know has impacts on the global economy and finance, both through commodity, financial, and trade channels,” he said.

Perry noted that the most immediate effects are felt through the commodity channel, namely rising oil prices, commodity prices in trade, and disruptions to supply chains.

Similarly, through the financial channel, there is global financial uncertainty, with overall indicators showing how oil prices have skyrocketed since February - March.

Up to yesterday, it once reached a high of US$122 per barrel. However, it then fell, resulting in volatility.

“Its impact is also the increase in interest rates or yields on US Treasury government bonds, both 2-year and 10-year,” said Perry.

“Last year, the 2-year one kept declining, the 10-year declined but not too quickly. But with the war in the Middle East, both have risen rapidly. Why? Because of the rise in the US fiscal deficit, including the war budget, which is evident there and will impact Indonesia,” he continued.

The BI Governor explained that the effects of this turmoil will be felt in Indonesia through two channels: fiscal and monetary. Rising oil prices will impact the fiscal side, while rising bond yields will lead to foreign fund outflows and strengthening of the US dollar.

“Since this year, there has been a large outflow from emerging markets to global financial markets, both in the form of bonds, stocks, and others. Then there is the strengthening of the US dollar, which is why from Bank Indonesia’s side, we need to recalibrate the various policies we implement,” he said.

These policies, Perry continued, are narrowing the room for interest rate cuts.

“Although we maintain the BI Rate at 4.75%, it seems that the space for its reduction in the future will increasingly be closed off, and we must also respond to it for stability,” he said.

Secondly, for 2026, BI will raise the SRBI to attract inflows and rupiah stability.

“Secondly, the SRBI which we were able to lower quickly last year. This indeed must be recalibrated to attract inflows while still maintaining banking liquidity adequacy,” he added.

Amid the turmoil, BI maintains its outlook for credit growth to remain in double digits at 13.3% to achieve adequate liquidity.

BI also continues to purchase SBN from the secondary market. This year, year-to-date, it has already purchased Rp 90.05 trillion.

“This is some recalibration where monetary policy now has more weight towards pro-stability.”