Indonesian officials vow again to steady rupiah, draw funds

Published Sat, Jun 6, 2026 · 03:51 PM

[JAKARTA] Indonesia’s finance and central bank officials said they will step up efforts to stabilise the currency and attract inflows after a week where the nation’s stocks tumbled at the fastest pace worldwide and its currency sank to all-time lows.

Authorities will aim to maintain sufficient liquidity in the market and work together to boost yields and attract capital inflows, Bank Indonesia governor Perry Warjiyo said at a press briefing in Parliament on Saturday (Jun 6). The central bank will increase the interest rate for government cash placed with it, Warjiyo said.

Indonesia’s fiscal situation is sound and the government will continue to synchronise policy with the central bank to boost growth, preserve stability and purchasing power, Finance Minister Purbaya Yudhi Sadewa said at the same briefing.

Global investors are rapidly losing confidence in Indonesia, unnerved by the more populist and interventionist agenda that President Prabowo Subianto has been pursuing, and steadily ratcheting up. The Iran war has compounded those concerns, accelerating capital outflows and a broader retreat from risk.

Just five months after hitting a record high, the benchmark stock index has tumbled nearly 39 per cent to become the worst performer this year among more than 90 global gauges tracked by Bloomberg.

The rupiah has weakened about 8 per cent, while foreign investors have pulled billions of dollars from Indonesian bonds. The sell-off has also revived concerns about Indonesia’s sovereign credit profile. The country won investment-grade ratings from major agencies around 2012 to 2017 after years of improving fiscal discipline.

There are also mounting concerns over the government’s economic management, confusion regarding new commodity export rules and a widening corruption investigation involving Prabowo’s flagship US$15 billion free meals programme.

“We have to look at it from a broader context of a difficult global environment, as well as domestic policy announcements that have been coming quick and fast, and I think kind of markets trying to make sense of it all,” DBS senior economist Radhika Rao said in a Bloomberg TV interview on Friday.

The proposed increase in remuneration paid by Bank Indonesia on government cash deposits is the latest coordination between monetary and fiscal authorities. The arrangement would help lower the government’s borrowing costs by allowing it to earn higher returns on funds parked at the central bank, reducing its net interest burden as financing needs rise.

“If we increase the remuneration to the government, the government’s net interest burden will be better managed,” Warjiyo told reporters on Saturday. “This also simultaneously addresses the concerns of one of the ratings agencies regarding the government’s increasing interest payments.”

Earlier this week, officials including Purbaya and Coordinating Minister of Economic Affairs Airlangga Hartarto met with visiting representatives from S&P Global Ratings in Jakarta.

The plan announced Saturday follows a series of measures aimed at supporting Prabowo’s growth agenda, including under the recently revised financial-sector legislation that broadened Bank Indonesia’s role in supporting economic growth and job creation.

The government currently has around 300 trillion rupiah (S$21.3 billion) placed at major state-owned banks, with part of the funds intended to support lending growth and the remainder available for purchases of government bonds, as authorities seek to stimulate economic activity while ensuring demand for state debt.

Rising oil prices driven by the conflict in the Middle East are adding to pressure on Indonesia’s economy, forcing the government to spend more on fuel subsidies while facing higher import costs for crude oil and liquefied petroleum gas. 

“We don’t see any positive catalyst, especially in the near term,” BNP Paribas Wealth Management Asia deputy chief investment officer Grace Tam said in a Bloomberg TV interview on Friday. “What we need to see is whether there is a stronger policy or supporting or market-friendly policies especially to turn the sentiment around. For now, I think confidence is quite low.” BLOOMBERG