Against the backdrop of continued pressure on the Indonesian rupiah and increased financial market volatility, the Indonesian government is strengthening the coordination of fiscal and monetary policies. On the 6th, senior officials from multiple departments spoke intensively, sending a signal of joining forces to stabilize the exchange rate and market expectations.
On that day, Indonesia's Deputy Speaker of Parliament Dasco convened high-level officials from the Ministry of Finance, the Central Bank, and the State Secretariat for a coordination meeting. The focus was on discussing the current exchange rate and financial market situation, as well as how to stabilize the economy through the joint efforts of fiscal and monetary policies.
This week, the rupiah's exchange rate against the US dollar fell below the 18,000 rupiah per dollar mark, having depreciated by over 7% this year. At the same time, the Jakarta Composite Index has dropped by more than 4% over two consecutive trading days, and concerns about capital outflows and policy uncertainty are mounting.
Dasco stated that the purpose of the meeting was to assess the current economic situation and to promote 'mutual support' between fiscal and monetary policies to achieve better economic growth.
Bank Indonesia Governor Perry said that the current focus of fiscal and monetary policy coordination is to 'keep in step' and jointly stabilize the rupiah's exchange rate.
He revealed that the central bank and the Ministry of Finance are currently advancing two main measures: first, increasing the investment attractiveness of Indonesian financial assets to draw foreign capital back in; second, maintaining ample market and banking system liquidity to stabilize financial market operations.
Perry admitted that, as overseas interest rates rise, there have been capital outflows from assets such as Indonesian stocks and government securities. Therefore, the central bank and Ministry of Finance have agreed to increase investment return attractiveness to stabilize the flow of funds in the market. The Indonesian government will continue to keep part of its fiscal funds deposited at the central bank, while Bank Indonesia will raise the level of interest paid to the government.
Indonesian Finance Minister Purbaya stated that coordination with the central bank will be further strengthened to enhance the effectiveness of fiscal and monetary policies.
He believes that, if both sides align their policies, it will help restore confidence in the rupiah.