Rupiah Weakens, Risk of Declining Public Purchasing Power

Yusuf Rendy Manilet, an economist from the Centre of Reform on Economics (Core), has highlighted the risk of declining public purchasing power due to the weakening rupiah. While citizens do not always transact in US dollars, essential commodities such as fertiliser, animal feed, and medicines involve import-based production costs. “Food and energy are the components most sensitive to exchange rate depreciation,” Yusuf stated, noting that livestock feed relies on imported soybean meal, the healthcare sector uses imported active ingredients, and urea and NPK fertilisers face similar pressures. The poor and those vulnerable to poverty in rural areas are expected to be the most affected. Yusuf warned that households with monthly expenditures of between Rp 2 million and Rp 3 million could see their real purchasing power drop by approximately 3-5 per cent within a few months if the rupiah continues to weaken, adding the risk of potential layoffs if conditions worsen. During a meeting, Harris Turino, a member of Commission XI of the Indonesian House of Representatives (DPR RI), questioned why the rupiah continues to weaken despite Bank Indonesia (BI) utilising various instruments, such as financial market interventions, increasing SRBI yields to 6.40 per cent, and substantial purchases of government securities (SBN). “The critical question is that all available instruments have been used, yet why does the rupiah continue to depreciate?” Harris asked Perry. While acknowledging that external global pressures are a significant factor, Harris noted that there must also be serious domestic issues to address. Bank Indonesia continues its efforts to strengthen the rupiah’s value.