Rupiah in Warning Zone, Economist: Market Tests Government Credibility

JAKARTA - The rupiah weakened further in the spot market at the start of trading on Thursday (28 May 2026). By 09:48 WIB, it fell 69 points, or 0.39%, to 17,870 per US dollar. At 15:27 WIB, the rupiah stood at Rp17,835 per US dollar, slightly stronger than in the morning session.

Syafruddin Karimi, an economics lecturer at Andalas University, warned that the government’s greatest risk to watch for is not just inflation or rising debt burdens, but a loss of market confidence in authorities’ ability to maintain economic stability.

‘If the rupiah breaches 20,000 per US dollar, the biggest risk the government must watch for is a market confidence crisis,’ Karimi told Kompas.com on Thursday (28 May 2026).

He added that while inflation and debt burdens may initially ease, they could worsen if market participants lose confidence in government and Bank Indonesia (BI) policies.

‘Such pressures can create a vicious cycle: a weaker rupiah, rising import inflation, higher debt costs, and soaring risk premiums,’ he said.

Karimi said the government should view the 20,000 level not merely as an exchange rate figure but as a psychological signal that markets are testing the credibility of national economic policies.

He recalled that Indonesia’s crisis history shows panic does not always occur at a specific exchange rate level, but when the rupiah depreciates rapidly and authorities are perceived as losing control.

Karimi noted that psychological levels such as 10,000, 15,000, and 16,000 per US dollar in the past were often seen by the public as symbols of economic stability failures.

Therefore, he urged the government and BI to prevent the psychological 20,000 level from triggering panic in the real economy and financial markets.

Currently, Karimi added, the rupiah’s depreciation cannot be considered a minor issue.