Rupiah Falls, Economist Says BI Intervenes To Maintain Stability Amid Global Uncertainty

Illustration. (Photo: Doc. Antara)

JAKARTA - Last week, the Rupiah exchange rate was the lowest point since April 2020 to weaken by 0.7 percent to the level of Rp. 16,578 per US dollar, amid the import rate policy from Canada and Mexico which took effect this week.

KISI Asset Management Economist Arfian Prasetya Aji said that with this condition, Bank Indonesia (BI) intervened in the market to maintain the balance of supply and demand for foreign exchange and maintain market confidence.

The move aims to ensure Rupiah's stability is maintained amid increasing global uncertainty.

Arfian said that currently, the majority of Asian currencies are also facing pressure due to US trade policies and uncertainty regarding the direction of the Federal Reserve (The Fed) monetary policy.

"Domestic factors, including the latest economic policy, have also increased negative sentiment among investors, which is reflected in the capital outflow of IDR 10.33 trillion in the past week," he said in his statement, Thursday, March 6.

Arfian conveyed that China's rejection of the new Reference Coal Price (HBA) has the potential to hamper coal exports in the development of the energy sector, some coal buyers from China reject the implementation of the new HBA.

"Indonesia's coal exporters also asked for a transition period of six months to accommodate this change, considering that the socialization and implementation of policies is considered too fast," he said.

According to him, the determination of the HBA aims to provide Indonesia with greater control over coal export prices and maintain domestic price stability.

However, Arfian said this policy could potentially hinder demand from China, with the possibility of a cancellation or renegotiation of the contract by buyers.

"If this happens, the impact could lead to a decrease in export volume and income from the Indonesian coal sector," he said.

On the other hand, Arfian said that Bank Indonesia also approved its support for the affordable housing program launched by President Prabowo by providing liquidity of IDR 130 trillion.

"BI emphasizes that this support is in line with macroeconomic policies aimed at increasing economic growth, creating jobs, and community welfare through the housing sector," he explained.

Meanwhile, BI also emphasized three forms of support for housing programs, namely ensuring the Asta Cita program contributes to high and stable economic growth, providing liquidity incentives for banks that channel credit to priority sectors, including housing, and supporting housing program funding by purchasing Government Securities (SBN) in the secondary market.

Arfian explained that the increase in liquidity in the banking sector is expected to accelerate lending to the housing sector, which has a chain effect on various industries such as cement, steel, building materials, and construction workers.

However, Arfian said this policy also raises debate over Bank Indonesia's independence.

"Some investors think that BI's overly deep involvement in government policies can reduce its credibility as an independent monetary authority," he said.

Arfian said that if this concern persists, the potential for outflows could increase, which in the end could have an impact on the stability of the Indonesian financial sector.