Rupiah Breaks Through Rp 17,000 as Economists Warn of Rising Cost of Living

Jakarta — The weakening of the rupiah to Rp 17,000 per US dollar has the potential to increase the cost of living for ordinary Indonesians.

Today’s opening trading saw the rupiah reach Rp 17,017 per US dollar.

Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies, noted that Indonesia is a net importer of crude oil, making rupiah weakness liable to trigger rises in fuel and liquefied petroleum gas prices.

This rupiah depreciation has coincided with crude oil prices surpassing $100 per barrel on international markets.

As a result, living costs for ordinary Indonesians are rising. “The impact on ordinary people is increased living costs — goods become more expensive due to the cost of living crisis,” said Bhima.

Beyond triggering price rises, the weakening exchange rate also risks prompting businesses to implement cost-cutting measures through mass redundancies to suppress production costs.

“Mass redundancies occur as companies face increased production costs, creating a chain reaction consequence of the exchange rate depreciation,” he added.

Bhima attributed current pressure on the rupiah to rising global uncertainty, which is prompting investors to shift funds towards assets considered safer, such as the US dollar, which has resumed its role as a safe haven.

Additionally, geopolitical tensions between Iran and the United States have amplified market concerns over potential spikes in global energy prices.

Should energy prices increase, domestic inflation pressures are expected to strengthen.

He also noted that Indonesia’s fiscal position has become the focus of market participants.

The widening of the state budget deficit (APBN) to four times the level of February 2025, coupled with weakening tax revenues, is perceived to be adding further pressure on the rupiah.

Furthermore, decisions by international agencies such as Moody’s and Fitch Ratings to downgrade Indonesia’s credit outlook from stable to negative have also hindered rupiah strengthening.

“Once fuel prices rise, as the state budget deficit widens, inflation will affect the performance of listed companies and government bonds. The warnings from Moody’s and Fitch are beginning to be priced into the market, including warnings from S&P concerning the fiscal situation,” he stated.