Waiting For US Inflation Data Release, Rupiah Potentially Weakens Amid Global Uncertainty

US and Rupiah dollars (Photo: dock. Antara)

JAKARTA - The rupiah exchange rate in trading Friday, July 26, 2024 is expected to weaken against the United States (US) dollar.

Quoting Bloomberg, the Rupiah exchange rate on Thursday, July 25, 2024, the rupiah exchange rate on the spot market closed down 0.27 percent at the level of Rp. 16,268 per US dollar. Meanwhile, the Jakarta Interbank Spot Dollar Rate (Jisdor) exchange rate closed lower by 0.22 percent to a price level of Rp. 16,250 per US dollar.

Director of PT Laba Forexindo Berjangka Ibrahim Assuaibi said market participants are still waiting for further instructions from important US data to be released, namely US GDP data in the second quarter of 2024, data on inflation indicators and the Fed meeting this weekend.

"Although few people expect to start lowering interest rates this month, there is a good chance that Fed's message of pivoting in September will be stronger, given the months-long decline in inflation and slower growth," he said in a statement, quoted Friday, July 26.

From an internal point of view, the government of the President and Vice President-elect Prabowo Subianto Gibran Rakabuming needs to be careful because he has to deal with due debt inherited by the Joko Widodo (Jokowi) government in the next five years or until 2029 which has reached Rp3,748.2 trillion and the new government has extraordinary promises.

The government debt maturity profile consisting of Government Securities (SBN) reached a total of IDR 3,245.3 trillion for the period 2025 to 2029. Meanwhile, the maturity of loans in the same period will reach IDR 502.9 trillion. In total, it reached IDR 3,748.2 trillion.

Ibrahim said the government must then be more careful, because when the government is in debt to cover the deficit, there are returns or interest that need to be paid. The above nominal does not include the payment of interest on government debt.

The current condition of government debt is still under the provisions in Law no. 17/2023 concerning State Finance set a safe limit for the ratio of government debt to 60 percent of gross domestic product (GDP) and a maximum deficit of 3 percent of GDP.

The Ministry of Finance (Kemenkeu) noted that the government's debt position reached IDR 8,353.02 trillion until the end of May 2024. With this amount of debt, the ratio of government debt as of the end of May 2024 was recorded at 38.71 percent of GDP.

This condition is in an unsafe position when referring to the International Monetary Fund (IMF) standard, which sets the comparison of government debt with income in the range of 90 percent to 150 percent.

"In fact, the ratio of government debt to income has reached 300 percent as of May 31, 2024. It will increase from 292.6 percent by the end of December 2024," he said.

Ibrahim estimates that the rupiah will fluctuate but close lower in trading Friday, July 26, 2024, in the price range of IDR 16,240 - IDR 16,300 per US dollar.