The Weakening of Rupiah

These days, the Indonesian rupiah (IDR) trades at roughly 13,000 to one U.S. dollar (USD), its weakest level since 1998. The ongoing currency depreciation may pose the greatest threat to Indonesia’s economy in more than a decade unless the government acts decisively to rectify the situation.

Rupiah changing unstable will extremely affect the macroeconomic in Indonesia. In outline, there are several variables that affect macroeconomic Indonesia, namely, the first is associated with the exchange rate of value balance of demand and supply on the domestic currency and  also foreign currency. The second is the interest rate, which will take place in the value of bank interest rates and will have an impact on changes in investment in Indonesia. The third  is the occurrence of inflation, rising prices in general and continuous, as a result of increased public consumption, and surplus liquidity in the market that trigger continuous consumption. The weakening of the exchange rate is also fueled by rising fuel imports made by Pertamina. Great fuel imports made the trade balance deficit and pressing needs of foreign currency in the country.

Currently, the ailing Indonesian rupiah is unlikely to find much assistance from the global economy, as the US recovery reduces the investment appeal of emerging markets, and ongoing weaknesses in Japan, China, and Europe damage the market for exports. Consequently, to stabilize the situation in response to both foreign and domestic factors, the economic community must look to Indonesia's President, Joko Widodo and Bank Indonesia (BI), the country’s central bank. 

Jokowi’s efforts to limit the central government’s budget have been commendable, especially in fuel price policy reform. Now, as we know Indonesia faces its worst currency crisis in 17 in recent years, the president must exercise strong monetary policy acuity, working in tandem with Bank Indonesia to stop the fall of the rupiah. 

Mega Indah Putri Utami
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