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Concern over next govt’s fiscal policy depressing rupiah, BI says
Analysts have urged the Finance Ministry and the transition team of president-elect Prabowo Subianto to reduce the pressure on the currency by providing clarity on fiscal policy.
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Bank Indonesia (BI) Governor Perry Warjiyo talks during a virtual press conference on Jan. 21, 2021, held after the central bank's two-day policy meeting. (Courtesy of Bank Indonesia/-)
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oncerns over the next administration’s fiscal sustainability have weighed on the rupiah exchange rate over the past month as the currency contends with ongoing pressure resulting from external uncertainty.
Analysts say a lack of clarity on the incoming government’s fiscal plans has encouraged foreign investors to pull their money out of the country. They have urged the Finance Ministry and the transition team of president-elect Prabowo Subianto to come up with ways to calm the market to reduce the pressure on the rupiah.
The currency was trading at around Rp 16,480 to the United States dollar on Thursday, according to data from Investing.com, the lowest point since April 2020, when the COVID-19 pandemic took a toll on emerging economies.
It hit a previous low of around Rp 16,415 per dollar on Monday before bouncing back to below Rp 16,400 per dollar on Wednesday.
Bank Indonesia (BI) said it was confident the rupiah would return to Rp 15,900 per dollar in the long run, banking on the country’s solid economic fundamentals.
“Our inflation is lower compared to the US and other countries, our economy grew at much faster rate, and the yield on our bonds is also more attractive,” BI governor Perry Warjiyo said at a press briefing on Thursday.
The rupiah exchange rate, he said, was being affected by negative sentiment that increased the risk premium of the Indonesian market.
