The Indonesian rupiah continues to hit historic lows against the US dollar, prompting the Indonesian government to inject IDR 2 trillion (approximately MYR 448 million) into the domestic bond market daily in a full effort to stabilize the rupiah’s exchange rate.
This was disclosed by Indonesian Finance Minister Purba Yudhoyono.
He said that with the authorities injecting IDR 2 trillion daily, the rupiah is expected to stabilize this week. The injected funds come from government fiscal management, including about IDR 420 trillion in fiscal surplus, requiring no additional use of the national budget allocation.
He stated: “We still have several funding sources; this is merely a matter of cash management. I do not think there will be a problem.”
Purba Yudhoyono emphasized that the intervention measures aim to create a positive market sentiment and avoid capital outflows. Stable bond prices help encourage foreign investors to keep their funds in Indonesia, easing the pressure on the rupiah.
Rupiah Depreciates About 6% This Year
Impacted by a strong US dollar, energy inflation, capital outflows, and market concerns over Indonesia’s own fiscal and economic situation, the rupiah has depreciated around 6% so far this year, hitting a record low of 17,720 rupiah per US dollar on the 19th.
Bank Indonesia Governor Perry Warjiyo noted that the central bank assesses the stability of the rupiah based on annual averages rather than short-term fluctuations, and the current depreciation is within controllable levels. Generally, demand for US dollars increases in the second quarter; the rupiah is expected to rebound in the third quarter.
Bank Indonesia pointed out that to avoid repeating the 1998 and 2008 financial crises, the defense of the rupiah will not be excessive, as that would reduce domestic market liquidity. The central bank is stabilizing the currency through foreign exchange operations and secondary market purchases of government bonds.
Rumors Government to Monopolize Bulk Commodity Exports
In addition, there are growing rumors that the Prabowo government will set up a new body to monopolize exports of key bulk commodities such as coal, palm oil, and minerals. The body will centrally procure bulk commodities from Indonesian exporters and then coordinate sales to international markets. The market fears this move would mean the Indonesian government is stepping up control over critical industries.