Indonesian rupiah falls to record low above 18,000 per US dollar as investors fret over economy and central bank oversight
Indonesia’s rupiah fell to a record low of 18,047 per US dollar on June 4, 2024, amid rising energy costs and investor concerns, while lawmakers passed a bill expanding oversight of Bank Indonesia, raising fears over its independence. The currency has lost over seven percent this year, becoming Asia’s worst-performing, as global oil price surges and a shrinking trade surplus strain the economy, despite recent central bank rate hikes and tighter dollar purchase rules.
Indonesia’s rupiah hit a historic low of 18,047 per US dollar on June 4, 2024, as surging global oil prices and economic uncertainty weighed on the currency. The country’s stock market also dropped nearly four percent, losing a third of its value in 2024, according to Bloomberg News. The decline follows Bank Indonesia’s recent efforts to stabilize the rupiah, including a 0.5 basis point interest rate hike to 5.25 percent—the first increase in two years—and stricter dollar purchase rules. Since May, buyers of over US$25,000 monthly must justify their currency needs, a measure tightened from US$50,000 in April. The rupiah’s fall reflects broader economic pressures, including a narrowing trade surplus, which shrank to just US$89 million in April from US$3.3 billion the prior month. Indonesia, a net oil importer, faces rising import costs, while dollar supply from trade dwindles. Economists warn that the central bank’s interventions may not be enough to reverse the depreciation, as high oil prices and geopolitical tensions—particularly the US-Israel conflict—further strain the economy. Parliament’s approval of a bill expanding oversight of Bank Indonesia, the Indonesia Deposit Insurance Corporation (LPS), and the Financial Services Authority (OJK) has added to investor concerns. The amendment, supported by Finance Minister Purbaya Yudhi Sadewa, aims to enhance economic growth and global competitiveness but risks undermining the central bank’s independence, economists say. Yose Rizal Damuri of the Centre for Strategic and International Studies (CSIS) and David Sumual of Central Bank Asia warned that political interference could increase market risk premiums and destabilize financial markets. The rupiah’s decline has also been linked to ‘costly populist programs’ and seasonal demand for dollars, including debt payments and dividends. Permata Bank economist Josua Pardede called the 18,000-per-dollar threshold a ‘psychological barrier’ for investors. Despite government assurances that fuel subsidies will remain unchanged, the combination of external shocks and domestic policies continues to pressure the currency and economy.
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