Economists Advise Steps to Tackle Weakening Rupiah

TEMPO.CO, Jakarta - The rupiah exchange rate has significantly weakened in the past few weeks, even reaching Rp17,000 per US dollar in the foreign market during the Eid al-Fitr holiday. Achmad Nur Hidayat, an economist and public policy observer at the National Development University Veteran Jakarta, believes that Bank Indonesia's actions to intervene in the foreign exchange market and to purchase government securities are only temporary solutions. Therefore, he has provided several recommendations.

Regarding monetary policy and managing foreign exchange, Achmad mentioned three things Bank Indonesia could do. Firstly, optimize foreign exchange reserves. "Shifting a portion of super safe instruments to liquid assets that have the potential to yield better returns without drastically sacrificing security," said Achmad in a written statement on Monday, April 7, 2025.

Secondly, he suggested that Bank Indonesia should oversee foreign exchange debt by tightening the rules and supervision of corporate foreign debt, especially for sectors that do not generate foreign exchange. He said this was to reduce the risk of default if the rupiah weakens.

Thirdly, Bank Indonesia should have an additional safety net, such as strengthening and expanding Bilateral Currency Swap Agreement (BCSA) agreements with strategic partner countries. "Bank Indonesia has been reluctant to use the Chiang Mai Initiative instruments, even though it could be a cheaper buffer than the safety nets currently used," he said.

On the other hand, Achmad emphasized the need for the government's economic diversification, as it is not enough to rely solely on commodities or specific sectors. "There is a need for acceleration in high-value-added sectors and the strengthening of the service sector, as done by the Philippines," said Achmad. He also mentioned that the government must strengthen the domestic base by reducing dependence on imported materials and promoting import-substitution industries.

In the Board of Governors Meeting of Bank Indonesia on Monday, April 7, 2025, Bank Indonesia decided to carry out several Non-Deliverable Forward (NDF) interventions to stabilize the rupiah exchange rate from high global pressures.

The Executive Director and Head of the BI Communication Department, Ramdan Denny Prakoso, mentioned that the offshore market interventions were carried out continuously in Asia, Europe, and the New York markets. Another step, Bank Indonesia will also intervene in the domestic market since the opening on April 8, 2025, by intervening in the foreign exchange market and purchasing government securities (SBN) in the secondary market.

Furthermore, Ramdan mentioned that Bank Indonesia will optimize rupiah liquidity instruments to ensure sufficient liquidity in the domestic money and banking markets.

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