Rupiah at Rp17,100 Does Not Mean Indonesia Is Returning to the 1998 Crisis, Here’s Why

The rupiah’s exchange rate against the US dollar continues to trend weaker, lingering comfortably above Rp17,000/US, whichseemstohavebecomeanewequilibriumpoint.Todayalone, therupiahopenedweakeragainstthedollaratthestartoftrading.AccordingtoRefinitivdata, onTuesday(14/4/2026), therupiahbegantradingintheredwithadepreciationof0.09. This weakening followed the previous session on Monday (13/4/2026), when the Garuda currency closed slightly weaker by 0.06% at Rp17,095/US.Therupiah′sexchangerateagainsttheUSdollarintheupperRp17, 000rangehasactuallybeenoccurringsince1April2026.BasedonBankIndonesia′s(BI)JakartaInterbankSpotDollarRate(Jisdor)referencerateon1April, therupiahwastradedonaveragebetweenbanksatRp17, 002.Sincethen, JisdorhasnotrecordedtheGarudacurrencymovingbelowRp17, 000, andithascontinuedtorisetoRp17, 122/US on 13 April 2026. This new rupiah level has already surpassed the highest point during the 1998 monetary crisis. As is known, at that time, the rupiah exchange rate, which was initially stable around Rp2,500 per US dollar, suddenly plunged sharply to over Rp15,000 per dollar in early 1998. Even, the rupiah once reached a very weak level of Rp16,800/US$. Although the rupiah rate is currently under pressure, surpassing the krismon period in value, senior economist and Executive Director of the Center of Reform on Economics (CORE), Mohammad Faisal, views Indonesia’s current economic condition as far stronger than during the 1998 crisis. The differences in Indonesia’s economic strength now compared to the crisis era include the real sector. According to him, the real sector condition in 1998 was very fragile, unable to sustain economic growth at that time, leading to negative investor sentiment that caused deep rupiah depreciation. “Some of them are the real sector, fiscal conditions, including the financial sector. The real sector, compared to 1998 and 2020 during the pandemic. In 1998, the real sector was fragile, even though economic growth was high in 1997,” he said at the Central Banking Forum 2026 at The Grand Ballroom, Mandarin Oriental Jakarta, on Monday (13/4/2026). The strengthening of the real sector itself is considered very important. Considering this sector is the main backbone of the economy that directly contributes to GDP formation. If the current government succeeds in keeping the real sector strong with maintained job creation, Indonesia’s economic resilience will remain strong amid global geopolitical conditions. He also noted that in recent times, there have been indications that retail sales rose continuously in the last five months of 2025 into the first three months of 2026. “In 2020 during COVID, the real sector was strong. But after COVID, there was significant weakening in the real sector; this is what we must reverse,” he explained. Second, it concerns fiscal matters. He acknowledges that Indonesia’s debt levels and those of other countries remain high post-pandemic. Therefore, he hopes the government can manage it well, or keep the fiscal deficit no more than 3% to maintain market confidence. “What differentiates is the institutions and financial sector. Currently, it’s far better, so resilience and anticipation are better now,” he concluded. On the other hand, Head of the Monetary and Securities Asset Management Department (DPMA) of Bank Indonesia (BI), Erwin Gunawan Hutapea, stated that the central bank has learned much from the 1998 financial crisis period in addressing shocks that pressure the rupiah exchange rate and Indonesia’s money market. He emphasised that in the current full uncertainty pressuring the financial market, the central bank tends to encourage market mechanisms to work effectively, rather than implementing foreign exchange controls. The aim is to encourage foreign capital inflows according to fundamentals, so BI’s role is only to maintain the market. If there is excess liquidity volume, BI will absorb it without disrupting market mechanisms. In maintaining the exchange rate and domestic financial market, BI will utilise a layer of defence mechanism, including foreign exchange reserves. BI also has swap agreements to support foreign exchange reserves with various central banks of other countries. This ‘ammunition’ can be used whenever needed. As a note, Indonesia has bilateral swap arrangements with several countries such as China, Japan, and South Korea. This cooperation is outlined in the Chiang Mai Initiative, and additionally, there is a multilateral scheme with ASEAN countries. “Learning from 98, the central bank has a safety net, so we have regional and global arrangements. The layer of defence is ready and in adequate amounts. Now, if it prolongs, we certainly hope for the best,” Erwin stressed. Although it has a strong layer of defence, BI also encourages entrepreneurs to perform hedging or risk mitigation. This hedging is used to lock in exposure to rupiah pressures. “We encourage you, like when going home for holidays, it’s better to book tickets rather than show up without reservation. Hedging instruments have developed; please use them as insurance to lock in exchange rate exposure,” said Erwin. With measured hedging, entrepreneurs do not need to immediately go to the spot market to buy dollars. He also asked entrepreneurs to buy hedging instruments provided by banks. This step helps distribute dollars. “Don’t come to the market to buy spot… We urge the use of hedging, which can be natural and instruments as permitted by the regulator. For example, reservation through hedging instruments helps distribute dollar demand,” he emphasised. Head of BCA Economics Dav