TEMPO.CO, Jakarta - Permata Bank Chief Economist Josua Pardede urged that the Indonesian government immediately restore market confidence through certainty of policy direction and strengthening foreign exchange sources. According to him, such mitigation would effectively encourage the strengthening of the rupiah exchange rate.
"The most effective mitigation from the government's perspective is essentially restoring confidence through certainty of policy direction and strengthening foreign exchange sources," Josua said in Jakarta on Wednesday, January 21, 2026, as quoted by Antara.
Currently, the rupiah exchange rate is around 16,900, or nearly 17,000 per US dollar. Therefore, Josua believes the government needs to secure a credible and easily verified fiscal narrative. Everything from the deficit target, financing sources, spending priorities, to safety measures in case revenues fall short must be explained clearly and consistently.
He believes the market tends to dislike uncertainty and requires transparent risk information to calculate future steps.
Furthermore, Josua said, debt financing must be managed in a measured manner to avoid increasing market panic. This includes scheduling issuances, strategies to expand the long-term investor base, and coordination with Bank Indonesia to maintain sufficient rupiah liquidity without fueling exchange rate speculation.
Next, there needs to be a foreign exchange policy for export proceeds, implementing a scheme that encourages repatriation and maintains foreign exchange availability in the market without burdening exporters' cash flow. Finally, practical measures should be taken to suppress unproductive foreign exchange demand.
Some ways to do this include strengthening import substitution for energy and food, ensuring that government spending with a large import component is scheduled more gradually, and encouraging businesses to implement reasonable hedging to prevent a sudden surge in dollar demand.
Furthermore, Josua assessed the potential for the rupiah exchange rate to approach 17,000 per US dollar due to simultaneous pressures from both global and domestic sources.
Foreign sentiment, for example, stems from demand for the dollar, which tends to strengthen amidst increasing global uncertainty, escalating geopolitical tensions, and uncertainty about the direction of US central bank policy, which also puts pressure on developing country currencies.
Meanwhile, domestic factors include a market that is highly sensitive to fiscal issues, amid concerns about a widening budget deficit and increased financing needs. As a result, market players are increasing their demand for dollars and holding back on new funds.
Furthermore, a widening State Budget (APBN) deficit could increase financing needs and increase market sensitivity to the supply of government bonds. "In conditions like these, pressure on the rupiah is often difficult to contain with short-term stabilization operations alone, especially if fiscal concerns are perceived as not abating," said Josua.
Furthermore, according to Josua, foreign exchange supply in the market could also weaken when the trade surplus shrinks and if there are changes to export proceeds that slow down the conversion of foreign exchange into rupiah. "Because that directly reduces the daily supply of foreign exchange in the market," he said.
Currently, Bank Indonesia has emphasized its continued presence in the market to maintain the rupiah's movement in line with its fundamental value. Stability is supported by an active stabilization mix, foreign capital inflows into Bank Indonesia Rupiah Securities and the stock market, low risk premiums, and strong foreign exchange reserves.
Therefore, the scenario of a rupiah exchange rate of 17,000 is more likely to occur in the form of gradual and volatile weakening, rather than uncontrolled weakening.
Josua assessed that the implications if the rupiah actually reaches 17,000 per US dollar would primarily be felt in the increased cost of importing raw materials and capital goods, the increased risk of pressure on food and energy prices, the potential for additional subsidy and compensation burdens, and the increasingly limited room for interest rate relaxation due to the need to maintain rupiah stability and capital flows.
On the other hand, he said, there are benefits for foreign exchange recipients, such as exporters, but these benefits are usually limited if the weakening occurs quickly. "This can disrupt business confidence and trigger delays in investment or purchases."
Finance Minister Purbaya Yudhi Sadewa previously expressed confidence that the rupiah exchange rate would strengthen again over time. "So it's just a matter of time before the rupiah strengthens," Purbaya said at the House of Representatives Complex in Jakarta on Monday, January 19, 2026.
Purbaya made this statement in response to the rupiah's recent weakening against the US dollar. On Monday afternoon, January 19, 2026, the rupiah closed down 68 points to 16,955 from its previous position of 16,896 per US dollar.
Read: Indonesia's Purbaya Confident Rupiah Will Regain Strength Over Time
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