In many developing countries, exchange rates are often understood merely as numbers displayed on financial market screens. In reality, behind every currency depreciation lies a long story about economic resilience, investor confidence, industrial structure, and the direction of state policy.
For example, when Indonesia’s rupiah broke through the psychological threshold of Rp17,750 per US dollar on May 19, 2026, the public did not simply see a change in numbers. They also read it as a signal that the Indonesian economy was facing a major test requiring a deeper and more comprehensive response.
This latest weakening of the rupiah did not happen suddenly. The rupiah moved gradually, from around Rp16,000, then breaking Rp17,000 in early April, before eventually reaching its weakest point in history.
Precisely because it happened gradually, this situation deserves serious attention. Slow depreciation often indicates long-standing structural issues, rather than temporary turbulence caused solely by global sentiment.
Many parties associate this situation with the escalating conflict between the United States and Iran, which pushed global oil prices above USD 100 per barrel. This condition strengthened the dollar as global investors sought assets considered safe.
This explanation is reasonable. However, when examined more deeply, there are other facts that deserve reflection.
Currencies in neighboring countries such as the South Korean won and the Philippine peso also weakened, but the pressure on the rupiah appeared deeper and lasted longer.
This is where the real challenge lies. Global factors affect all countries, but the resilience of each economy is determined by its own domestic foundations.
This means that today’s rupiah issue is not only about international turbulence, but also about how Indonesia’s economic structure responds to global pressure.
Bank Indonesia deserves appreciation for continuing to work to maintain financial market stability. Various instruments have been deployed, ranging from foreign exchange market intervention, the issuance of SRBI, purchases of government securities in the secondary market, to other stabilization measures.
These efforts demonstrate that the monetary authority is moving quickly to ease volatility and maintain market confidence.
However, the challenges being faced are indeed not light. In situations like the current one, monetary policy cannot work alone.
There is even a view that it is time for Bank Indonesia to consider raising the BI Rate by 25 basis points to 5 percent in order to help contain pressure on the rupiah.
Such a step would certainly have consequences, but it is often necessary to maintain broader stability.
Behind the exchange rate turbulence, there are also fiscal issues that require collective attention. The state budget deficit in the first quarter of 2026 reached around Rp240 trillion, nearly double the figure recorded in the same period the previous year.
For global investors, this condition serves as an important indicator in assessing a country’s economic health. When the deficit widens alongside downward credit rating outlooks from international agencies such as Moody’s and Fitch Ratings, markets interpret it as an increase in risk.
Therefore, foreign capital outflows from the domestic market cannot always be understood merely as panic. In many cases, investors make decisions based on their assessment of economic fundamentals.
This shows how important it is to maintain fiscal credibility, especially amid heightened global uncertainty.
However, Indonesia’s challenges run deeper than just the budget deficit. The national economic structure still relies heavily on raw commodity exports.
When commodity prices fluctuate or global energy prices surge, pressure on the domestic economy becomes difficult to avoid.
On the other hand, the dividend repatriation season of foreign companies during every second quarter also consistently increases demand for US dollars in the domestic market.
This phenomenon is actually predictable every year, which means it requires more systematic and integrated anticipation.
This situation shows that Indonesia still needs to strengthen its economic foundations so that it is not too easily swept away by global currents.
Countries with strong industrial structures usually possess more solid buffers when facing international turbulence. They have high value-added exports, stable productive investment, and foreign exchange reserves supported by competitive domestic industries.
Indonesia actually has a major opportunity to move in that direction. The potential for downstream natural resource processing, strengthening the manufacturing industry, developing the digital economy, and transforming the energy sector could become new foundations for the national economy.
However, transformations like these require policy consistency and courage in execution. Downstream industrialization, for example, cannot stop at being merely a development slogan. It must genuinely generate domestic added value, quality jobs, and stronger foreign exchange earnings for the country.
On the other hand, Indonesia’s economic growth of 5.61 percent in the first quarter shows that economic activity continues to move.
Household consumption remains the primary support, while government spending helps maintain growth momentum. This is important capital amid a highly uncertain global situation.
However, many economists also warn that growth relying too heavily on consumption and government spending carries its own vulnerabilities.
Long-term resilience will be much stronger if supported by productive investment and high value-added exports. Sustainable foreign exchange earnings capable of maintaining rupiah stability are created from these sectors.
Therefore, the momentum of the rupiah’s depreciation should become a point of national reflection. Crises often serve as reminders that economic development cannot merely pursue numerical growth, but must also strengthen the quality of the economic structure itself.
Indonesia needs healthy fiscal consolidation, control of unproductive spending, improvements in tax revenue, and the courage to accelerate the transformation of national industries.
Most importantly, investor and public confidence are built through genuine policy consistency. Markets do not only listen to speeches or promises. They observe whether policies are actually implemented in a disciplined and sustainable manner.
In an era of rapidly changing global economics, credibility has become one of a country’s most important assets.
A rupiah above Rp17,750 is indeed a serious warning, but it is not the end of everything. Indonesia has faced various crises before and has always managed to rise again with new lessons learned.
What is needed today is not panic, but the courage to carry out structural reforms consistently and collectively.
It is precisely under pressure like this that a nation’s maturity is tested. Whether it will remain busy patching short-term problems, or begin building economic foundations that are more resilient to global shocks.
The future of the rupiah should be understood as being determined not only by the foreign exchange market, but by how seriously Indonesia builds a productive, value-added economy capable of standing stronger amid a constantly changing world.
*) The author is a Professor of Economics, Dean of the Faculty of Economics and Business at YARSI University, Research Director at GREAT Institute, and CEO of SAN Scientific.
This article was published on ANTARA News
