Economist: Even Without Using Dollars, Rural Residents Remain Impacted by Rupiah Weakening

The weakening of the rupiah exchange rate against the US dollar is considered to have a tangible impact on the lives of people in rural areas and low-income housing groups. Yusuf Rendy Manilet, an economist at the Centre of Reform on Economics (CORE) Indonesia, explained that this impact can be felt directly by the lower class, even though they are not involved in transactions using foreign currencies such as the US dollar.

“If asked whether the weakening of the rupiah is most felt by the lower class and rural communities, the answer is indeed yes. While they do not transact directly using US dollars, many of their basic needs are heavily influenced by imported goods and raw materials,” Yusuf stated when contacted on Monday (18/5/2026).

“The impact is felt most rapidly in agriculture. Raw materials for fertilisers, pesticides, seeds, and even livestock medicine are still largely imported. When the rupiah weakens, production costs rise. Although the government maintains fertiliser subsidies, non-subsidised fertilisers and other agricultural inputs usually rise more quickly. As a result, farmers’ margins are also pressured,” he said.

In addition to agricultural production aspects, this exchange rate movement also extends to daily food consumption, which is a primary commodity for rural residents. “From the perspective of daily consumption, many foods that are very close to rural communities are sensitive to the exchange rate. Wheat for instant noodles and bread is imported, as is a large portion of the soybeans used for tofu and tempeh,” he revealed.

He believes this economic pressure is further exacerbated by transport operational costs and other vital components such as healthcare. “Energy and distribution are also affected. When the exchange rate weakens, pressure on fuel and logistics costs increases. This makes the cost of distributing goods to villages more expensive, while the cost for farmers to transport harvests also rises. The same applies to healthcare, as most raw materials for medicines are still imported, meaning medicine prices have the potential to rise as well,” he added.

Yusuf added that the expenditure structure, which is dominated by the fulfilment of primary needs, is the main reason why the economic blow from the rupiah’s weakening is felt much more significantly at the rural level.

Tegu Yudo Wicsono, an economist and Dean of the Faculty of Economics and Business at the International Islamic University Indonesia, stated that the impact of the rupiah’s depreciation will be more palpable for the middle and lower classes. “This is because they do not have many alternatives,” he remarked.