Rupiah Strengthens on Positive Market Response to Fiscal Stability

The rupiah exchange rate strengthened at the close of trading on Friday, gaining 21 points or 0.12 percent to Rp17,922 per US dollar from the previous Rp17,943 per US dollar.

Market analyst Ibrahim Assuaibi said the strengthening was triggered by a positive response to the government considering further efficiency and budget cuts for the flagship Free Nutritious Meals (MBG) programme to maintain fiscal stability.

“The budget for the National Nutrition Agency (BGN) in the 2026 State Budget (APBN) has been adjusted. The budget ceiling for MBG has been cut from the initial plan of Rp335 trillion to Rp268 trillion,” he stated in a written note in Jakarta on Friday. Based on the latest adjustments, the allocation was reportedly further sharpened or cut to around Rp228.38 trillion.

The government is said to be considering an additional cut of up to Rp50 trillion to strengthen the state’s financial position. This reduction is being undertaken to respond to global economic risks, maintain the fiscal deficit, and improve programme governance.

On the other hand, he continued, Bank Indonesia (BI) has aggressively strengthened its market intervention through three main lines: the spot market, Domestic Non-Deliverable Forward (DNDF), and the Government Securities (SBN) market to dampen volatility and prevent further depreciation of the rupiah, which had recently approached the Rp18,000 per US dollar level.

“If the weakening continues, BI’s strategy is to raise the benchmark interest rate, even though the central bank has already raised it by 100 basis points (bps) in just two months. What the market needs now is a clear anchor of expectations that exchange rate stability remains the top priority, supported by close coordination between monetary and fiscal policies,” Ibrahim said.

From a communication perspective, he stated that BI needs to consistently affirm its policy direction, the adequacy of foreign exchange reserves and stabilisation instruments, and its commitment to ensuring that rupiah depreciation does not lead to an inflation surge or disruption to financial system stability.

Meanwhile, Bank Indonesia’s Jakarta Interbank Spot Dollar Rate (JISDOR) actually weakened to Rp17,962 per US dollar from the previous Rp17,942 per US dollar.