23-10-2023 (JAKARTA) In an effort to maintain stable inflation, bolster the purchasing power of its citizens, and support economic growth, Indonesia is preparing a series of policy packages, according to its finance minister. Sri Mulyani Indrawati announced these measures following a meeting with President Joko Widodo, central bank chief Perry Warjiyo, and other financial regulators.
“We have conveyed to the president that we will take measures to safeguard the economy, keeping inflation in check and ensuring stability in the exchange rate and the financial system,” Sri Mulyani stated.
Additionally, regulators will conduct stress tests for the financial sector to ensure it remains resilient during a period of high market volatility.
To safeguard citizens’ purchasing power, the government will address the impact of the El Nino weather pattern. However, no further details were provided regarding the specific steps to be taken.
Indonesia has been grappling with a prolonged dry season that has led to drought conditions in many parts of the country, impacting harvests. This year’s dry season is anticipated to be the most severe since 2019, partly due to the return of El Niño. Consequently, prices of essential food items such as rice, chilli, and sugar have been on the rise, even though headline inflation has remained low.
Sri Mulyani’s announcement comes as the Indonesian rupiah hit its lowest level against the US dollar since 2020, reaching 15,965 on Monday before making a slight recovery. The currency has been steadily depreciating due to investor caution amidst US monetary tightening and escalating tensions in the Middle East.
Last week, the Indonesian central bank took the unexpected step of raising interest rates to counter the rupiah’s decline, and economists have suggested that further rate hikes may be necessary if the currency continues to weaken.
Sri Mulyani also mentioned plans to “synchronise” fiscal and monetary policies to mitigate risks stemming from global developments. Edi Susianto, the head of monetary management at Bank Indonesia (BI), revealed that the central bank has been intervening in the foreign exchange market to support the rupiah’s value.
