Freeing the Real Sector from Pressure While Safeguarding Central Bank Independence

Disrupting the measured independence of Bank Indonesia (BI), which prioritises the interests of the nation and state, is tantamount to escalating the country’s economic problems. The real sector, which is facing immense pressure, also requires extra attention. Therefore, do not add to the problems by disturbing BI’s independence. Let BI focus on controlling the rupiah exchange rate and the inflation rate, while the Ministry of Finance and related parties should focus on improving fiscal policy and formulating solutions to restore the performance of the real sector and MSMEs.

When the domestic real sector has yet to find a way out of the current pressures, disrupting the measured independence of the monetary sector only adds to the problems. The dynamics of the real sector today are marked by the bankruptcy of many manufacturing companies and MSMEs (micro, small, and medium enterprises). The consequence of this string of bankruptcies is the ongoing decision to implement layoffs (PHK). The unemployment bubble continues to swell.

Meanwhile, the monetary sector must contend with fluctuations in the rupiah exchange rate against major world currencies, particularly the US dollar. The rupiah exchange rate hovered around 18,000 per US dollar in the last week of July 2026, while the inflation rate as of June 2026 was recorded at 3.34 percent. Foreign exchange reserves at BI, as of May 2026, stood at 144.9 billion US dollars. This figure indicates that national foreign exchange reserves have been depleted by 10.3 billion US dollars, used for market intervention to stabilise the rupiah and for external debt payments.

Beyond managing the vulnerability of the rupiah exchange rate, the monetary sector is also focused on controlling inflation and maintaining macroeconomic stability through regulating the money supply and managing the benchmark interest rate (BI rate), which invariably impacts people’s purchasing power.

Meanwhile, the State Budget (APBN) deficit of Rp 196.5 trillion as of June 2026 is evidence that the fiscal sector is not without its own problems. The deficit is feared to widen further if the financing management of priority programmes—such as the Free Nutritious Meals (MBG) and the Merah Putih Village Cooperatives (KDMP)—is not promptly addressed. The budget allocation for these two programmes reaches hundreds of trillions of rupiah. It has been proven that the implementation of these programmes has been marked by spending that is far from the principles of efficiency and effectiveness, and this must be rectified immediately.

These are the real problems currently emerging in both the monetary and fiscal sectors. Ideally, amid the ongoing global uncertainty, BI and other institutions overseeing the fiscal domain should focus on their respective main duties and functions (Tupoksi). Such a normal and dynamic process apparently did not proceed as it should. Then, BI made a surprise move. On 27 July 2026, Perry Warjiyo resigned from his position as Governor of Bank Indonesia. The resignation was submitted in a letter to President Prabowo Subianto.

While awaiting the election of a new BI Governor, and in accordance with applicable regulations, the leadership of BI is continued by Senior Deputy Governor Destry Damayanti. It is natural that the situation at BI has drawn public attention. While waiting for the election of a new BI governor, questions have arisen, primarily regarding the background of Perry’s resignation. The public was only informed that Perry resigned voluntarily for personal reasons.

The dynamics between the monetary and fiscal sectors became apparent when the Ministry of Finance initiated the withdrawal of part of the Excess Budget Balance (SAL) funds from BI, amounting to Rp 400 trillion in several stages. These funds were placed in Himbara (State-Owned Banks Association) banks such as Bank Mandiri, BRI, BNI, and Bank DKI. The aim was to strengthen banking liquidity. Although the Ministry of Finance has the right to withdraw SAL from BI, questions arose when there was a slowdown in the use or placement of these funds in the banking system for the purpose of strengthening liquidity to drive credit growth.

As is generally understood, regulating liquidity and the money supply falls under the authority of the central bank, in this case BI. However, the initiative to strengthen banking liquidity at that time was taken by the Ministry of Finance. There was a back-and-forth process. The placement of SAL funds in Himbara was once withdrawn and returned to BI, but the Ministry of Finance subsequently withdrew the SAL again and placed it in Himbara.

The government’s intention to strengthen banking liquidity to boost credit growth to the business sector deserves appreciation. Unfortunately, the ability of the business or real sector to absorb credit offers from banks was weak at the time. During the period of liquidity strengthening in Himbara, the business world was also flooded with credit offers from non-Himbara banks, including loan offers from non-bank financial institutions. The Financial Services Authority (OJK) recorded that the total public debt from online loans reached Rp 103.73 trillion as of May 2026.

Although interested, many credit offers from banks, including Himbara, were rejected because people did not know what the loans would be used for. It is a fact that the domestic business world is facing extremely weak market demand due to declining purchasing power. Moreover, at the same time, potential debtors witnessed or heard about the bankruptcy of several large and small-scale companies, along with the ongoing wave of layoffs.

Strengthening banking liquidity to encourage credit growth to the business sector is indeed important. However, strengthening banking liquidity will remain unproductive if the domestic real sector is left in its current state of suspended animation. In addition to strengthening banking liquidity, a more serious effort to restore the performance of the real sector is equally important. It must be recognised that the domestic real sector is currently facing successive pressures.