• The Indonesian rupiah has fallen to its weakest level since 1998, prompting concerns over economic policy and global market instability.
• Bank Indonesia has intervened in the foreign exchange market to support the rupiah, purchasing currency and bonds.
• Government officials emphasize strong economic fundamentals even as investors express concerns about fiscal health and policy direction.

The Indonesian rupiah has recently plunged to its lowest level since the Asian financial crisis, driven by escalating global uncertainty and domestic policy concerns. As of late March, the currency traded at approximately 16,640 rupiah per US dollar, below the previous lows established in June 1998. In response, Bank Indonesia has stepped in to stabilize the currency, offering support by purchasing rupiah in the currency and bond markets. The central bank's efforts aim to address rising pressures tied to external factors, including trade tensions and geopolitical instability.

Bank Indonesia officials have noted that fluctuating market conditions are a routine occurrence, reassuring investors about the resilience of Indonesia’s economic fundamentals. The director for monetary and securities asset management, Fitra Jusdiman, stated, "Global uncertainty is still related to the impact of [US President Donald] Trump’s tariff policy and geopolitical turmoil," highlighting the broader implications of current financial conditions on the rupiah's valuation. Minister Airlangga Hartarto echoed this sentiment, suggesting that these fluctuations are typical given external pressures, as reported by The Jakarta Post.

Despite the alarming drop in the rupiah's value—marking a decline of over 3% in 2025 alone—government and financial leaders believe that the strong economic framework underpins its long-term prospects. As emphasized during a press briefing, officials cited economic growth rates around 5%, low inflation, and manageable foreign debts as indicators of resilience.

However, analysts caution that continuing volatility may stem from profound uncertainties about fiscal policies. Recent government spending initiatives, particularly under President Prabowo Subianto, such as the ambitious nationwide free meal program and the proposed Danantara sovereign wealth fund, have raised concerns regarding the sustainability of fiscal health. Critics argue that such programs could exacerbate existing fiscal constraints, complicating the recovery of investor confidence.

Further complicating this situation is the upcoming US tariff deadline, which is anticipated to impact investor attitudes significantly. As of now, foreign capital fled the Indonesian stock market, contributing to the heightened volatility in the rupiah, according to reports by South China Morning Post.

Market interventions by Bank Indonesia are expected to continue amid these volatile conditions, with economists recommending that clear and supportive fiscal guidance be communicated to restore market confidence. With lasting concerns about domestic policy direction and external economic pressures, the outlook for the Indonesian rupiah remains cautious.

For more details, click here: Reuters.