Facing a challenging depreciation that has seen the rupiah breach the Rp 17,425 per US dollar mark, Bank Indonesia (BI) Governor Perry Warjiyo has unveiled a robust seven-step strategy aimed at stabilizing the national currency. These decisive measures have secured the full endorsement of President Prabowo Subianto, signaling a unified governmental effort to fortify the rupiah.
The announcement followed a high-level, limited meeting of the Financial System Stability Committee (KSSK) with the President at Jakarta’s Merdeka Palace on Tuesday, May 5th.
Despite its current valuation, Perry emphasized that the rupiah is fundamentally undervalued when compared to Indonesia’s strong economic indicators. He pointed to a robust 5.61% economic growth in the first quarter, consistently controlled inflation, significant credit expansion, and ample foreign exchange reserves as key pillars supporting its intrinsic value. These factors, he asserted, are strong fundamentals that should naturally drive the rupiah towards stability and appreciation.
However, the rupiah’s recent struggles are primarily attributed to external pressures. Perry cited soaring global oil prices, consecutive interest rate hikes by the United States, and a strengthening US dollar as major catalysts, leading to significant capital outflows from emerging markets. Compounding these global dynamics are seasonal factors between April and June, which historically increase dollar demand for dividend repatriation, debt servicing, and Hajj pilgrimage expenses. Despite these pressures, Perry reiterated his confidence, stating that the rupiah is poised to stabilize and tend to strengthen in the future.
During the press conference detailing these stabilization efforts, Governor Perry was joined by other prominent KSSK members, including the Minister of Finance, Purbaya Yudhi Sadewa, Chairperson of the Financial Services Authority (OJK) Board of Commissioners, Frederica Widyasari Dewi, and Chairperson of the Deposit Insurance Corporation (LPS) Board of Commissioners, Anggito Abimanyu. Coordinating Minister for Economic Affairs, Airlangga Hartarto, was also in attendance, underscoring the collaborative approach to fortifying the rupiah’s stability.
To proactively counter the rupiah’s depreciation and restore confidence, Bank Indonesia has meticulously prepared and rolled out its comprehensive seven-point stabilization agenda:
Bank Indonesia’s Seven-Step Strategy to Stabilize the Rupiah
1. Intensifying Foreign Exchange Intervention in Domestic and Offshore Markets. BI will conduct robust intervention in the foreign exchange market through spot transactions and Domestic Non-Deliverable Forward (DNDF) instruments domestically. Furthermore, interventions will extend to Non-Deliverable Forward (NDF) markets in key international financial centers such as Hong Kong, Singapore, London, and New York. Perry confidently stated, “We will continue to intervene to stabilize the rupiah both domestically and internationally. Our foreign exchange reserves are more than sufficient to ensure rupiah exchange rate stability.”
2. Attracting Inflows through Bank Indonesia Rupiah Securities (SRBI). To counteract capital outflows from government bonds (SBN) and the stock market, BI is actively promoting increased capital inflows via its Bank Indonesia Rupiah Securities (SRBI) instrument. This strategic move aims to fortify the nation’s financial resilience by bolstering domestic investment.
3. Continuing Secondary Market Purchases of Government Bonds (SBN). Bank Indonesia will persist in purchasing SBN in the secondary market. Perry noted that year-to-date SBN purchases have already reached Rp 123.1 trillion. He added, “We have purchased Rp 123.1 trillion of SBN from the secondary market year to date, and we will coordinate, including with the Minister of Finance, on potential buyback operations.”
4. Ensuring Ample Banking Liquidity. In collaboration with the Ministry of Finance, BI is committed to maintaining loose liquidity conditions within the banking sector and money market. Perry highlighted that this commitment is evident in the 14.1% growth of primary money, signaling a healthy and supportive financial environment essential for economic stability.
5. Tightening Restrictions on US Dollar Purchases. To manage dollar demand, BI is reinforcing restrictions on US dollar purchases. The previous limit of US$100,000 per person per month will be reduced to US$25,000. Perry explained, “Purchases of US dollars at or above US$25,000 will require underlying documentation. This is what we will strengthen.” Additionally, BI is encouraging the increased use of the Chinese Yuan in domestic transactions to lessen reliance on the US dollar.
6. Boosting Dollar Supply through Offshore NDF Market Participation. Sixth, BI is enhancing its intervention in the offshore NDF market by permitting domestic banks to participate in these transactions. This initiative aims to significantly increase the supply of foreign currency, thereby strengthening the rupiah’s stabilization efforts. Perry remarked, “We are also allowing domestic banks to participate in selling offshore NDFs abroad so that the supply is greater, which will bolster the stabilization of the rupiah exchange rate.”
7. Heightened Supervision of High-Volume Dollar Purchases. Perry also affirmed BI’s commitment to intensifying oversight of banks and corporations with high US dollar purchasing activities. This stringent supervision is crucial to ensuring the continued stability of the financial system. “We send supervisors from OJK to banks and corporations with high dollar purchasing activities to ensure financial system stability is maintained,” Perry stated.
Summary
Bank Indonesia has unveiled a seven-point strategy to stabilize the rupiah following its recent depreciation beyond Rp 17,425 per US dollar. Backed by President Prabowo Subianto, this initiative addresses external pressures such as rising global oil prices and US interest rate hikes, while leveraging Indonesia’s strong economic fundamentals like controlled inflation and robust growth. Key officials from the Financial System Stability Committee (KSSK) emphasized a unified approach to bolster market confidence.
The comprehensive measures include intensive foreign exchange market interventions, the promotion of Bank Indonesia Rupiah Securities (SRBI) to attract inflows, and increased secondary market government bond purchases. Additionally, the strategy enforces tighter restrictions on US dollar transactions—lowering the documentation-free purchase threshold to US$25,000—and mandates stricter supervision of high-volume currency buyers. These actions aim to improve dollar supply and liquidity while reducing domestic reliance on the US currency.