Fuel Prices Rise, Rupiah Weakens: Banking Loan Quality Needs Vigilance
Geopolitical turmoil in the Middle East serves as a reminder that conflicts far from Indonesia can have a direct impact on our wallets.
Tensions involving Iran and the risk of global energy supply disruptions are pushing up and volatilising world oil prices.
For Indonesia, which still relies on oil and fuel imports, this is not merely a foreign issue.
The effects ripple through three main channels: rising fuel prices, higher logistics costs, and pressure on the rupiah exchange rate.
When global oil prices rise, the burden of energy subsidies in the state budget increases. If domestic fuel prices are held steady, the government’s fiscal space narrows. Conversely, if prices are adjusted, the burden shifts to the public and businesses.
At the same time, global uncertainty drives investors towards safe-haven assets like the US dollar. Currencies of emerging markets, including the rupiah, become vulnerable to depreciation.
In recent times, the rupiah has fluctuated between Rp16,985 and Rp17,300 per US dollar, a relatively high level that drives up the prices of imported goods, industrial raw materials, medicines, and machine components.
The business world faces simultaneous increases in energy, logistics, and imported raw material costs. Large companies still have room to negotiate, improve efficiency, or hedge risks.
However, for micro, small, and medium enterprises (MSMEs) operating on thin margins and limited cash, this pressure can immediately disrupt business cash flows.
Households face similar strains. Spending on transportation, electricity, gas, and basic needs rises, while incomes do not always keep pace with costs.
Since energy spending is hard to cut, families will squeeze other expenditures.
In such situations, instalments for vehicles, mortgages, credit cards, and consumer loans become more prone to disruption, especially for fixed-income groups and informal workers without adequate savings buffers.
Problematic loans rarely arise overnight. They usually emerge gradually. Initially, debtors start delaying instalments by a few days.
Then requests for tenor extensions, rescheduling, or additional working capital to cover cash shortfalls appear.
If the pressure persists, loans that were previously smooth shift to special mention, then doubtful, and finally non-performing.
In aggregate, Indonesia’s banking sector currently appears solid. Bank Indonesia data shows the banking non-performing loan (NPL) ratio at around 2.17 percent (gross) and 0.83 percent (net) as of February 2026.
The capital adequacy ratio (CAR) remains strong, above 25 percent. Foreign exchange and rupiah liquidity are relatively stable, and several major banks reported declining NPLs in 2025.