Economist Warns Government as Rupiah Plummets
The Rupiah has been under pressure from the US dollar. The exchange rate has now broken records, reaching Rp 17,500. This figure is far from the target set in the state budget this year.
Economist from the Indonesia Strategic and Economic Action Institution (ISEAI), Ronny P Sasmita, revealed several things that the government needs to do to strengthen the Rupiah. First, maintain fiscal credibility and the state budget so that the market is confident that the deficit remains under control.
According to Ronny, market confidence must be restored. This aims to ensure that investors who previously withdrew their capital will reinvest in Indonesia, thus balancing the exchange rate.
“Financial markets are very sensitive to perceptions. Sometimes, a single statement from an official can cause the Rupiah to weaken faster than imagined,” said Ronny, Friday (15/5/2026), quoted from detikFinance.
Furthermore, Ronny encourages the government to strengthen exports and increase foreign exchange earnings from exports by supplying more US dollars domestically. He believes that the new Foreign Exchange Earnings (DHE) policy should be optimized to maintain the exchange rate.
In addition, in the long term, the government is expected to accelerate downstreaming and import substitution. This is done to reduce dependence on imported goods.
Can the Rupiah Return to the Rp 16,500 Level?
In theory, Ronny said, the Rupiah exchange rate can return to the target in the 2026 state budget of Rp 16,500. However, the process of strengthening the Rupiah currently depends heavily on global dynamics in the coming months, especially the direction of The Fed’s interest rate policy and global geopolitical tensions.
“If external pressures begin to ease and foreign capital flows return to emerging markets, including Indonesia, the opportunity to move in that direction remains open. However, the government and the market must also be realistic that global volatility is currently much higher than in previous years,” said Ronny.
Economist from the Center of Reform on Economics (CORE) Indonesia, Yusuf Rendy Manilet, added that in the short term, Bank Indonesia must remain active in maintaining the foreign exchange market so that the weakening is not too sharp and does not trigger panic. He believes that to strengthen the Rupiah or return it to the target in the state budget, much more is needed.
Rendy said that it is necessary to maintain market confidence. In addition, he said that members of the Financial System Stability Committee (KSSK) must be united and implement policies in the same direction and with good communication.
“But the most important thing is not just intervention, but maintaining market confidence. Investors want to see the government, BI, and financial authorities speaking in the same direction. If the communication looks inconsistent or the policies change, the pressure on the Rupiah usually increases quickly,” said Rendy.
He also said that the structure of the Indonesian economy still relies heavily on imports of raw materials, energy, and foreign capital flows. As a result, whenever there is global turmoil, the Rupiah is immediately affected.
Indonesia, he continued, needs to gradually change its economic structure by strengthening domestic industries to produce everyday commodities and also export products. “Therefore, the government needs to seriously strengthen domestic industries, especially sectors that have made our imports large, such as pharmaceuticals, basic chemicals, and industrial components,” said Rendy.
In addition, Rendy said that policy certainty is also very important for the government to provide. He believes that investors can accept strict rules, as long as they are clear and consistent. According to him, what usually makes them reluctant is not the rules, but the changes that are too sudden and difficult to predict.
This article has been published on detikFinance. Read the full article here!
(iws/iws)