Habibie\'s Experience Seen as a Benchmark for Stabilising the Rupiah
Habibie's experience as president of the third term in restoring the rupiah's exchange rate during the 1998 crisis is seen as a reference for facing current rupiah pressures. Economist and Rector of Paramadina University Didik J. Rachbini says that the prolonged weakness of the rupiah is not solely influenced by technical economic factors, but is also closely linked to the level of public and market participants' confidence in the government.
He notes that the rupiah's condition, considered to be undervalued, reflects an economic-political problem that makes the market not fully aligned with Indonesia.
Didik says the 1998 crisis experience shows that restoring confidence can be the key to stabilising the exchange rate. At that time, Habibie's government was seen as having gradually restored public and market confidence, allowing the rupiah to strengthen significantly in a relatively short period.
"We need to find out why the market no longer sides with us so that the exchange rate keeps falling. This is an economic-political problem, not merely a technical economic issue. But we have best practice for how the economic and political crisis in 1998 could be gradually restored," Didik said in a statement on Tuesday (19/5).
He cited that, during Habibie's presidency, the rupiah moved from around Rp16,800 per US dollar to Rp6,500 per US dollar. According to Didik, that success can be used as a reference in formulating comprehensive policies to face current rupiah pressures.
"Habibie's experience of lowering the rupiah from Rp16,800 per dollar to Rp6,500 per dollar in a short time can be used as a reference for creating comprehensive policies," he said.
Didik says he was both a witness and a direct participant at the time. He notes that he was appointed as a member of the National Reform Team in Economics through Presidential Decree No. 198 of 1998 on the Establishment of the National Reform Team Towards a Civilised Society. He says Habibie's success in strengthening the rupiah was mainly triggered by the restoration of trust after almost a year in a transition government.
Initially, Habibie's position as transitional president was doubted because he was perceived as part of the New Order regime. Yet public trust gradually grew as the government pursued reforms of economic institutions, democratisation, and decentralisation. Habibie was also seen as showing a commitment to restoring Indonesia without vested interests.
"Although initially strongly opposed, Habibie believed that his position as transitional president was legitimate and legal. Based on that, his main task was to restore trust in the government," Didik said.
He argues that the 1998 crisis was essentially a crisis of trust and institutions, not merely a fundamental economic crisis. Therefore, as trust began to recover, the rupiah is seen to move back towards its rightful level and gradually strengthen.
"Therefore, the president believed that when confidence began to recover, the rupiah could return to its true level and even strengthen again," he said.
In Didik's view, the strengthening of trust during Habibie's era occurred simultaneously through the recovery of economic confidence and political reform. The government at the time opened up democratic space, accelerated elections, released political prisoners, and granted freedom to the press without control of the Publishing Business Licence for Printing (SIUPP).
The reforms were followed by strengthening economic institutions through banking restructuring and recapitalisation, the establishment of the National Banking Recovery Agency (BPPN), and the merger of state banks into Bank Mandiri.
He regards the institutional reforms undertaken at that time as a crucial foundation for Indonesia's economic resilience to this day. One of them was the establishment of Bank Indonesia's independence through Law No. 23 of 1999 so that the central bank would no longer be used as an instrument of political or rent-seeking interests.
"Hence, the institutional reforms subsequently carried out by President Habibie included establishing Bank Indonesia's independence," Didik said.
He argues that the issue of the rupiah's exchange rate and rising capital outflows today cannot be separated from the factor of market confidence. Therefore, the government is seen as needing to build positive signals consistently to restore confidence in the Indonesian economy.
"I am confident that, from various angles, the current exchange rate issue and rising capital outflows are trust problems," he explained.
He adds that building trust must be followed by ongoing institutional reforms, starting with bureaucratic deregulation, strengthening competitiveness, improving the investment climate, and strengthening the export sector and foreign exchange reserves. He notes that the institutional reform moves currently planned by President Prabowo Subianto through bureaucratic deregulation are seen as the right policy direction to strengthen market confidence and support rupiah stability in the long term.
He highlights the sharp drop in the revenue-to-GDP ratio to only 9.3% in Q1-2026.
Business circles in Batam are beginning to worry about the rupiah's value against the US dollar, reportedly capable of breaking the Rp18,000 level.
He argues that, in such a situation, the central bank's role is not only to control inflation but also to maintain confidence in the overall policy direction.
He explains that interventions are not only carried out in domestic markets but also in foreign markets. This step has implications for the country's foreign exchange reserves.