The Indonesian government is actively maneuvering to protect the rupiah from global market volatility, opting for a strategic focus on the bond market rather than direct foreign exchange intervention. Finance Ministry officials are prioritizing the stability of Government Securities (SBN) to prevent a massive sell-off by investors.
Purbaya Yudhi Sadewa, who also serves as the Chairman of the Board of Commissioners of the Indonesia Deposit Insurance Corporation (LPS), explained that the government’s primary goal is to ensure the bond market remains a secure environment. By stabilizing these assets, the government aims to reduce the pressure on the national currency. “We are not entering the dollar market directly; our strategy is strictly focused on maintaining bond market stability,” Purbaya noted in Jakarta on Wednesday (May 13).
Recent data indicates that the bond market is showing signs of recovery. According to Purbaya, foreign investors have started returning to the SBN market, which has contributed to a gradual easing of pressure on the rupiah. While he joked that officials are “using prayers” to assist these efforts, he confirmed that he has given clear directives to the Directorate General of Budget Financing and Risk Management (DJPPR) to implement concrete stabilization measures. These efforts will remain consistent over the coming months to ensure sustained market confidence.
A critical component of this strategy involves the activation of the Bond Stabilization Fund (BSF). Purbaya emphasized that keeping the bond market steady is essential to curbing capital flight. When the bond market is stable, investors are less prone to panic-selling, as they are no longer fearful of significant capital losses. Conversely, as bond prices strengthen, investors benefit from both coupon payments and the potential for capital gains, providing a strong incentive to remain in the domestic market.
The government continues to coordinate closely with Bank Indonesia (BI) to safeguard the broader financial system. Despite the rupiah fluctuating near the 17,500 per US dollar mark, Purbaya assured that the state budget for energy subsidies remains secure. He confirmed that previous fiscal calculations—factoring in oil prices at US$120 per barrel—remain valid, and no immediate budget recalculations are required to manage the current exchange rate volatility.
Summary
The Indonesian government is stabilizing the rupiah by prioritizing the security of the Government Securities (SBN) market rather than direct foreign exchange intervention. By activating the Bond Stabilization Fund (BSF) and maintaining market confidence, officials aim to prevent investor panic and capital flight. This strategy is proving successful as foreign investors return to the bond market, helping to gradually alleviate pressure on the national currency.
Coordinating closely with Bank Indonesia, the government remains committed to these consistent stabilization measures to ensure long-term financial resilience. Despite the rupiah fluctuating near 17,500 per US dollar, officials confirm that existing fiscal buffers remain robust. Consequently, current state budget projections for energy subsidies are considered secure, requiring no immediate recalculations amid the ongoing global volatility.
