The Jakarta Post
The rupiah could hover around Rp 17,500 or even slide to as low as Rp 20,000 against the US dollar, the weakest in history, if Indonesia’s economy contracts and the COVID-19 downturn is prolonged, Finance Minister Sri Mulyani Indrawati has warned.
The local currency, already the worst performer in Asia, is currently trading at Rp 16,450 per US dollar, according to Bloomberg data. It has depreciated around 15 percent since the end of December last year. The rupiah touching Rp 17,500 to Rp 20,000 per US dollar would be a record low, surpassing the Rp 16,950 against the greenback during the 1998 financial crisis.
“This is the worst-case scenario […] We will take measures to prevent this materializing,” Sri Mulyani told a teleconferenced media briefing on Wednesday. The projection was part of macroeconomic assumption scenarios and exercises carried out by the government in response to the COVID-19 pandemic, she added.
The government has also prepared the worst-case scenario of an economic contraction by 0.4 percent if the pandemic lingers. The baseline scenario is that Indonesia’s economy will grow by 2.3 percent this year, the lowest in 21 years, Sri Mulyani said.
“We are forward-looking, so the steps we’re taking are preventive measures,” Sri Mulyani said, adding that COVID-19 had disrupted household activities, hampered firms’ sales and revenue and had hit micro, small and medium businesses.
Bank Indonesia (BI) has been stabilizing the rupiah through its "triple market intervention" measures, focusing on the foreign exchange spot market, domestic non-deliverable forward (DNDF) market and secondary bond markets.
The central bank has bought a total of Rp 172.5 trillion worth of government bonds, including Rp 166.2 trillion from foreign investors in the secondary market. “We will always be in the market to maintain liquidity,” BI Governor Perry Warjiyo said.
Perry added that the central bank was seeing signs of a slowing down in capital outflows, which had caused the rupiah to depreciate. Capital outflows eased from Rp 167.9 trillion during the height of the coronavirus outbreak from Jan. 20 to March 30 to Rp 145.1 trillion so far this year until March 30.
The latest government bond auction was also oversubscribed, Perry added, indicating that interest in Indonesian financial assets remains intact.
“The government absorbed Rp 22.2 trillion from the Rp 15 trillion indicative target from the auction, having received total bids of Rp 35.5 trillion,” Perry said.