Indonesia rupiah hits new record low; president downplays day-to-day impact of currency weakness

[JAKARTA] The Indonesian rupiah slid to a fresh record low on Monday (May 18) as stocks slumped and global oil prices hit two-week highs, while the president said that the economy was strong and the currency’s slide would not affect villagers because they did not use US dollars.

The rupiah fell more than 1 per cent to a record low of 17,668 a US dollar in early Monday trading. Even before the Iran war, Indonesia’s currency and stocks were under pressure from investor concerns about the government’s spending plans, market transparency and central bank independence.

Jakarta’s main stock index fell more than 4 per cent as trading resumed after a holiday weekend, after global index provider MSCI removed more than a dozen companies from its Indonesia indexes last week.

On Saturday, President Prabowo Subianto spoke about the rupiah’s weakness at two events during a visit to East Java province, both times saying that villagers were not affected by it because they do not transact in US dollars.

“As long as Purbaya can smile, no need to worry,” Prabowo said, referring to his finance minister, Purbaya Yudhi Sadewa, at the launch of a government programme to build cooperatives in villages across the country.

“However many thousands of rupiah the exchange rate to the dollar is, you folks in villages do not use the dollar anyway,” he said.

“Believe that our economy is strong, our fundamentals are strong. Whatever people say, Indonesia is strong,” he added.

In a separate speech, Prabowo emphasised that South-east Asia’s largest economy has enough food and energy supply, while chastising those who said that the rupiah’s decline signalled a weakening economy.

“Many countries are panicking but Indonesia is still okay,” he said.

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Indonesia has increased its fuel subsidy budget to shield people from the impact of rising global crude prices.

The central bank has also been intervening in the foreign exchange market to support the exchange rate. The central bank will hold its monthly monetary policy review on Wednesday. REUTERS