JAKARTA - Economic observer from Jember University, East Java, Adhitya Wardhono PhD said the government needs to strengthen the signal of fiscal discipline, especially related to the deficit, debt, and quality of spending when the rupiah weakens in the range of Rp. 18,000 per US dollar.
"Then government spending needs to be directed to productive sectors that strengthen export capacity, import substitution, energy, food, and productivity," he said as quoted by ANTARA, Saturday, June 6.
According to him, the weakening of the rupiah is not only about the strengthening of the US dollar, but the market signals are testing three things, namely Indonesia's external resilience, fiscal credibility, and consistency of monetary policy.
"This time the weakening of the rupiah is not just a daily fluctuation, but should be read as part of the signal that the market needs certainty about the direction of policy," he said.
The exchange rate is basically the price that reflects how the market assesses the economic conditions of a country. When the rupiah weakens significantly even though economic growth reaches 5.61 percent and inflation is still under control at 2.42 percent, there is a paradox that needs to be explained.
The rupiah remains under pressure showing that the problem is not just short-term foreign exchange liquidity, but also concerns market expectations, global risks, and perceptions of domestic policy directions.
"The rupiah touched a record low of around Rp18,021 on Thursday (4/6) trading. The weakening occurred amid market concerns about the Iran war as well as domestic factors such as government fiscal governance," he said.
Adhitya suggested that the government also needed to maintain public communication because statements that underestimate the weakening of the rupiah could worsen market perceptions.
"In a depressed rupiah condition, public officials' communications are part of economic policy. Incorrect statements can get a more expensive penalty than market intervention," he said.
The lecturer at the Faculty of Economics and Business at Unej explained that the rupiah condition has entered a phase of serious pressure, so the government is expected to make policies that strengthen the signal of fiscal discipline so that the rupiah does not continue to weaken.
"As long as the energy sector is still in deficit and energy imports are high, the rupiah will remain vulnerable to rising oil prices and geopolitical turmoil," he said.
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