Rupiah Under Pressure as Legislator Says Indonesian Economy Still Dependent on Foreign Currency Financing
A member of Commission XI of the Indonesian House of Representatives, Kamrussamad, has assessed that the pressure on the rupiah is a consequence of the national economic structure. Over the last two decades, he stated, the Indonesian economy has remained reliant on foreign currency-based external financing.
According to the Gerindra Party politician, this condition is reflected in Indonesia’s current account balance, which has more often recorded a deficit over the long term. He therefore considers it necessary to take strategic steps to reduce dependence on the US dollar and other foreign currencies.
“The pressure on the rupiah today is indeed caused by our economic structure over the past two decades, which has been more supported by foreign loans based on foreign currency. This is evident from our current account balance, which has more often experienced a deficit,” Kamrussamad said in a statement quoted on Friday (5/6).
According to him, one step the government can take immediately is to reactivate the local currency settlement (LCS) scheme. The scheme has previously been agreed upon by Indonesia and several trading partner countries, such as China, Japan, Malaysia, and others.
Kamrussamad is of the view that the use of local currencies in bilateral trade transactions can reduce the need for US dollars. Thus, pressure on foreign exchange reserves and the rupiah exchange rate can be minimised.
He explained that strengthening the LCS is part of a long-term effort to build national economic resilience. With more trade transactions using local currencies, Indonesia will have greater room to maintain exchange rate stability amid global economic dynamics.
Kamrussamad added that the current depreciation of the rupiah must also become a momentum to overhaul the economic structure comprehensively. Apart from reducing dependence on foreign currency-based financing, the government needs to strengthen productive sectors capable of generating foreign exchange sustainably.
He is optimistic that various policies the government has pursued, including the implementation of the export proceeds foreign exchange (DHE) policy, will have a positive impact on increasing national foreign exchange reserves. However, he noted, the results cannot be felt instantly and require time.
“The implementation of the export proceeds foreign exchange policy, which is now underway, will help increase our foreign exchange reserves. But everything does take time,” he said.
Kamrussamad believes that a combination of strengthening foreign exchange reserves, optimising the LCS, and improving the national economic structure will form an important foundation for maintaining rupiah stability in the future. “We must strengthen our own economic foundation. If the economic structure becomes stronger, the rupiah will also be more resilient in facing various external pressures,” he concluded.