Economist Calls on Indonesia to Strengthen External Sector to Stabilize Rupiah

Indonesia’s large domestic market may support economic growth, but economist Didik J. Rachbini says it cannot by itself provide a strong foundation for the rupiah.

Didik called for policies that strengthen the external sector and generate more business income from abroad. In his view, Indonesia relies too heavily on domestic consumers, whose spending mainly circulates within the country in rupiah rather than bringing in fresh foreign exchange.

He acknowledged that domestic activity creates jobs, generates corporate profits and supports gross domestic product. But he said it does not directly increase foreign-exchange earnings, leaving the currency vulnerable when the economy remains dominated by internal demand.

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The economy needs to develop export-based policies that will bring in large dollar foreign-exchange reserves. That is what Indonesia actually needs to support a strong exchange rate.

Didik cited Indonesia’s foreign-exchange reserves at about $145.3 billion at the end of July 2026. He compared that with roughly $426.2 billion for Singapore, $279.2 billion for Thailand and $132.6 billion for Malaysia. For a country the size of Indonesia, he said, the reserve level is too small to provide a sufficient external buffer.

“Without a foundation of competitiveness in the foreign sector and relying only on the domestic market, do not expect Bank Indonesia to make the rupiah stable and strong over the next five years,” Didik said. He added that interest-rate policy alone would not be enough.

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Without a foundation of competitiveness in the foreign sector and relying only on the domestic market, do not expect Bank Indonesia to make the rupiah stable and strong over the next five years.