MPR RI Research Body Discusses Strategic Steps to Address Rupiah Depreciation

According to Tifatul, Indonesia’s current economic situation is under intense scrutiny from domestic society, academics, and foreign investors. The depreciation of the rupiah, which recently neared Rp 17,700 per USD, serves as a signal that the government must exercise extreme caution in its policies and public statements. ‘The people, observers, academics, foreign nations, and investors are all watching the Indonesian government’s steps in facing this economic volatility. Our policies, attitudes, and statements announced in the media provide the information feeding their perception of Indonesia’s economic credibility, solidity, and capacity. This is a matter of trust,’ Tifatul stated on Wednesday (3/6/2026).

These remarks were made during a Focus Group Discussion (FGD) titled ‘Rupiah Depreciation and National Economic Resilience: Monetary, Fiscal, and Social Welfare Implications’ held in Cibubur, Bekasi, on Tuesday (2/6). Citing Thomas F. Friedman’s theory, ‘The world is flat,’ Tifatul reminded that the world is interconnected, meaning events in Indonesia are subject to global observation. He expressed regret if government narratives often shift away from the actual substance of economic issues, such as dismissing the rupiah’s weakness by claiming rural populations do not use dollars.

He noted that geopolitical conflicts, such as the ongoing tensions between the US and Iran, directly impact global oil prices, which have breached 100 USD per barrel, triggering global economic crises that affect Indonesia. Wijayanto Samirin, an economist from Universitas Paramadina and former Special Staff to the Vice President, argued that the rupiah’s slump is caused by a complacent government hiding behind the narrative of a global crisis. He analysed that in the last six months, the rupiah has weakened by 7.29 per cent against the US dollar and has depreciated against 86 per cent of the world’s currencies, including major Asian currencies like the Chinese yuan and the Indian rupee.

‘The rupiah is weakening against almost all major currencies in the world. Against the Australian dollar, we have weakened by 15.87 per cent, against the Chinese yuan by 11 per cent, and even against the Indian rupee by 1.58 per cent. This refutes the narrative that this is purely a global problem. This is a domestic crisis of confidence. The problem lies with us,’ Wijayanto asserted.

He likened the exchange rate to human body temperature, stating that a continuous decline is a strong indicator of serious disturbances in national economic health. He criticised current handling methods as merely treating symptoms rather than the root cause. While Bank Indonesia (BI) intervenes by buying rupiah and selling dollars to manage volatility, Wijayanto argued that the primary cure lies with the government, which has yet to act effectively.

This situation is exacerbated by a 28 per cent drop in the domestic stock market over the last six months, leading to a capital outflow of Rp 54 trillion. While the banking sector remains more robust than during the 1998 crisis, Wijayanto warned that the government’s fiscal position is much more fragile. The debt-to-GDP ratio has risen from 23 per cent in 1998 to 41 per cent today, with nearly 50 per cent of government revenue now dedicated to servicing principal and interest payments. In 2026, the government is expected to spend Rp 1,430 trillion on debt servicing, necessitating new debt issuances of Rp 1,700 trillion, which frightens investors and prevents capital inflow.

This crisis of trust has led international financial institutions to impose a high risk premium on Indonesia, reaching 4.39 per cent, significantly higher than Singapore (1.4 per cent) or China (1.2 per cent). Furthermore, Wijayanto dismissed claims that rural populations are safe from depreciation, noting that every 10 per cent depreciation in the rupiah can drive inflation up by 0.5 to 1 per cent, directly impacting the price of basic necessities.