Bank Indonesia (BI) Governor Perry Warjiyo has unveiled a seven-point strategy to stabilize the rupiah, which has recently weakened to IDR 17,425 against the U.S. dollar. These measures, which have received the endorsement of President Prabowo Subianto, were finalized following a high-level meeting of the Financial System Stability Committee (KSSK) at the Merdeka Palace in Jakarta.
Governor Warjiyo emphasized that the current exchange rate is undervalued, failing to reflect the strength of Indonesia’s economic fundamentals. He noted that the first-quarter economic growth of 5.61% serves as a solid foundation for a stronger currency, supported further by well-managed inflation, robust credit growth, and sufficient foreign exchange reserves. “These fundamentals demonstrate that the rupiah should be stable and has a clear tendency to appreciate,” Warjiyo stated during a press briefing following the meeting with President Prabowo.
Despite these strong indicators, the rupiah remains under pressure due to global headwinds, including elevated oil prices, rising U.S. interest rates, and the overarching strength of the dollar, which has triggered capital outflows from emerging markets. Furthermore, seasonal demand for the dollar between April and June—driven by dividend repatriations, debt obligations, and Hajj pilgrimage requirements—has intensified the pressure on the domestic currency.
In addition to Governor Warjiyo, the briefing was attended by key KSSK members, including Minister of Finance Sri Mulyani Indrawati, Chairman of the Financial Services Authority (OJK) Board of Commissioners Mahendra Siregar, and Chairman of the Indonesia Deposit Insurance Corporation (LPS) Board of Commissioners Purbaya Yudhi Sadewa, alongside Coordinating Minister for Economic Affairs Airlangga Hartarto. To address the volatility, BI has outlined the following stabilization measures:
1. Forex Intervention in Domestic and Offshore Markets
BI will intensify its intervention in the foreign exchange market through spot transactions and Domestic Non-Deliverable Forward (DNDF) instruments. Furthermore, the central bank will conduct interventions in offshore NDF markets in major financial hubs, including Hong Kong, Singapore, London, and New York. Warjiyo confirmed that Indonesia’s foreign exchange reserves are more than sufficient to maintain market stability.
2. Attracting Capital Inflows via SRBI
To offset capital outflows from government bonds (SBN) and the stock market, BI is actively encouraging capital inflows by promoting its Rupiah Securities (SRBI) instrument as a primary investment vehicle.
3. Continued SBN Purchases
BI remains committed to supporting the market through continued purchases of government bonds (SBN) in the secondary market. As of this year, BI has already purchased IDR 123.1 trillion in SBN and is coordinating closely with the Ministry of Finance to manage potential bond buybacks.
4. Maintaining Banking Liquidity
In collaboration with the Ministry of Finance, BI is ensuring that liquidity in the banking and money markets remains ample. This effort is underscored by a 14.1% growth in primary money, ensuring that credit flows continue to support economic activity.
5. Stricter Limits on Dollar Purchases
BI is tightening regulations on dollar procurement by reducing the threshold for monthly purchases from USD 100,000 to USD 25,000 per person. Any transactions at or above this new limit will require proof of underlying economic activity. Additionally, the central bank is promoting the use of the Chinese Yuan in domestic transactions to reduce reliance on the U.S. dollar.
6. Increasing Dollar Supply via Offshore NDF
To bolster supply, BI is strengthening its intervention in the offshore NDF market by allowing domestic banks to participate in these transactions. This increased participation is designed to provide greater liquidity and strengthen the stability of the rupiah.
7. Enhanced Supervision of Dollar Transactions
Finally, BI is intensifying oversight of banks and corporations with high volumes of dollar purchasing activity. In coordination with the OJK, the central bank will deploy supervisors to monitor these entities closely, ensuring that all activities remain aligned with the broader goal of maintaining financial system stability.
Summary
Bank Indonesia (BI) has introduced a seven-point strategy to stabilize the rupiah following its recent depreciation against the U.S. dollar, a move fully endorsed by President Prabowo Subianto. Governor Perry Warjiyo asserted that the currency’s current weakness does not reflect Indonesia’s strong economic fundamentals, which are supported by robust growth, manageable inflation, and sufficient foreign exchange reserves. These measures were finalized during a Financial System Stability Committee (KSSK) meeting to address pressures from global economic headwinds and seasonal demand for foreign currency.
The intervention plan includes active market operations through spot transactions and Domestic Non-Deliverable Forwards (DNDF), alongside efforts to attract capital inflows via Rupiah Securities (SRBI). Additionally, BI is tightening dollar purchase regulations, increasing bond market support, and enhancing oversight of major dollar-denominated transactions. By collaborating with the Ministry of Finance and the OJK, the central bank aims to ensure ample liquidity and maintain stability in both domestic and offshore financial markets.
