Government Assures Rupiah Weakening is Not the Same as the 1998 Asian Crisis

Illustration of the fall in the rupiah exchange rate (AI Gemini doc)

JAKARTA - Finance Minister Purbaya Yudhi Sadewa emphasized that the current Indonesian economic conditions do not lead to an economic and monetary crisis as occurred in 1997-1998, even though the rupiah exchange rate had penetrated the level of Rp18,000 per US dollar (USD).

Purbaya's statement was made in response to the concerns of some market participants after the rupiah touched the psychological level of Rp18,000 per dollar, which sparked comparisons with the situation leading up to the Asian economic crisis in the late 1990s.

"We are not heading towards a situation like 1997-1998 again. Our fiscal is good, the economy is good, there are only negative sentiments here and there that disturb the exchange rate a little, but it should be able to be improved with a better combination between the government, the Ministry of Finance, and the central bank," said Purbaya during a working visit to the Tanjung Priok Customs Office, Jakarta, Saturday, June 6.

According to Purbaya, the current fundamental conditions of the Indonesian economy are very different from when the 1997-1998 crisis occurred. He assessed the government's fiscal health, financial sector stability, and economic policy coordination as factors that make Indonesia have a stronger resilience to global pressures.

Therefore, the government together with Bank Indonesia will continue to strengthen coordination of fiscal and monetary policies to maintain the stability of the rupiah exchange rate while increasing market confidence.

Purbaya explained that one of the steps taken was to strengthen the attractiveness of domestic financial instruments so that they are able to attract foreign capital flows back into the country. At the same time, the government and the central bank are also trying to maintain the liquidity of the money market and the stability of the banking sector.

In addition, the management of government cash placed at Bank Indonesia will continue to be optimized through a remuneration mechanism that is considered more effective to support the stability of the financial system.

According to him, the increasingly close coordination between the government and Bank Indonesia is also expected to help reduce production costs for business actors, especially industrial sectors that are still dependent on imported raw materials.

"We will make sure that it happens in the near future," he said.

Purbaya emphasized that the country's fiscal condition until now has been maintained and the national economic activity is still running in accordance with the development direction set by the government.

"All I can say now is that the fiscal is good, the economy is good, and the leadership of the President is still strong enough to ensure that everything goes according to the development strategy," said Purbaya.

The government hopes that strengthening fiscal and monetary coordination can maintain the stability of the rupiah exchange rate and dampen market negative sentiments, so that the national economy continues to grow amid global economic dynamics and uncertainty.