MPR Study Body Group IV Holds FGD on National Economic Resilience
Amid the rupiah’s historic low, Group IV of the MPR Study Body held a focus group discussion (FGD) titled ‘Rupiah Depreciation and National Economic Resilience: Monetary Implications, Fiscal Implementation, and Social Welfare’ in Depok on Monday, 25 May.
The FGD is part of a comprehensive review of the 1945 Constitution of the Republic of Indonesia and its implementation, particularly regarding the national financial system, economy, and social welfare. It focuses on viewing rupiah depreciation not merely as market volatility but as a test of Indonesia’s constitutional and institutional design.
Tifatul Sembiring, Chairman of Group IV of the MPR Study Body, stated the topic was chosen as rupiah depreciation has garnered widespread attention, from academic forums to grassroots discussions. He noted that currency depreciation is not merely a technical issue for Bank Indonesia (BI), but a signal of how robust the national economy’s foundations are and the country’s readiness to maintain price stability, fiscal space, business environment, and public purchasing power.
“The state must have clear and planned mechanisms to address difficult monetary and economic situations, so it is not always reactive when global pressures arise,” Tifatul said in a statement on Tuesday, 26 May 2025.
As a speaker, Dr. Banu Muhammad Haidlir, an academic from the Faculty of Economics and Business at the University of Indonesia (FEB UI), explained that the current rupiah depreciation constitutes a ‘constitutional stress test’.
In his presentation, Banu highlighted the rupiah’s decline from approximately Rp 15,399 per US dollar at the end of 2023 to around Rp 17,670 on 22 May 2026, representing nearly a 15% exchange rate erosion over two years.
“This depreciation was triggered by a combination of escalating conflicts in the Middle East driving oil price surges, stringent global monetary policies, and capital outflows due to MSCI index rebalancing,” he explained.
Banu stressed that the key question for MPR is whether Articles 23 (state finances), 33 (national economy), and 34 (social welfare) are sufficiently robust and operational to withstand such shocks.
On the policy front, Banu explained that BI is caught in the monetary trilemma—maintaining exchange rate stability, allowing capital mobility, and preserving interest rate independence simultaneously. BI has raised interest rates to 5.25%, tightened cash dollar purchases, and implemented six layers of defence in financial markets.
However, Banu added, these measures have eroded foreign exchange reserves by nearly $10 billion over four months and led global credit rating agencies to downgrade Indonesia’s outlook to negative.
“Fiscally, the first-quarter 2026 state budget shows expenditure growing three times faster than revenue, with the deficit nearing 1% of GDP and government debt reaching approximately 40.75% of GDP, while interest payments consume nearly a fifth of government revenue,” he said.
Banu also warned that beneath the 5.61% first-quarter 2026 economic growth, serious structural issues persist. Growth is heavily reliant on increased government consumption, while low productivity and a shrinking middle class—down by approximately 10.6 million people over six years—remain concerns.
“Under these conditions, rupiah depreciation delivers layered blows to vulnerable households through rising imported food prices, healthcare costs, and job losses in labour-intensive manufacturing. For MPR, this underscores the need to reassess how the state translates social justice and welfare mandates into concrete policies during crises,” he explained.
From an external and structural perspective, Yusuf Wibisono of Nextpolicy noted that today’s rupiah depreciation occurs amid a prolonged trade surplus and relatively high foreign exchange reserves.
“This indicates the root cause lies in a shallow economic structure heavily reliant on primary commodity exports and strategic imports, from food to capital goods,” he said.
Yusuf stressed that as long as Indonesia depends on raw material exports and high-value-added imports, global shocks will continue to pressure the rupiah and erode public purchasing power.
Meanwhile, Esther Sri Astuti, Executive Director of the Institute for Development of Economics and Finance (INDEF), highlighted global and social risk dimensions. She explained that rising global oil prices could widen the fiscal deficit and increase inflationary pressures, while slower global growth would pressure exports and exacerbate imported inflation.
“For businesses and workers, this means higher production costs, layoff threats, and weakened purchasing power. For poor households, rupiah depreciation quickly translates to higher food costs and reduced healthcare access,” she said.
Therefore, Esther said, future policy focus should not merely chase growth figures but strengthen growth quality, food security, financial market depth, and reduce reliance on strategic imports.
Institutionally, the MPR, through its Study Body, views this as a crucial moment to deepen constitutional analysis on state finances and the economy. Repeated rupiah depreciation has opened space for reflection on whether constitutional provisions on state finances, the economy, and social welfare sufficiently guide and constrain policies during global pressures and prolonged crises.
The FGD also raised proposals, including incorporating ‘fiscal resilience’ norms in Article 23, strengthening monetary authority independence at the constitutional level, and a minimum social protection spending clause in Article 34 that cannot be cut during fiscal stress.