Rupiah Strengthening Needs Monetary and Fiscal Policy Synergy

Indonesia's rupiah remains vulnerable to global financial market shifts and worldwide economic uncertainty, posing a key challenge to the national economy. Economists emphasize that coordinated policies between the government and Bank Indonesia are crucial for maintaining investor confidence and bolstering domestic economic resilience.

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If portfolio inflows increasingly pour into Indonesia through Surat Berharga Negara (SBN), the country will have greater opportunities to manage this foreign capital for programs that directly impact national productivity. This increased demand for rupiah, he noted, would strengthen its exchange rate against the US dollar.

Surya Vandiantara, an economist at Bengkulu Muhammadiyah University, views Bank Indonesia and government efforts to enhance the attractiveness of domestic financial instrument yields and manage market liquidity as appropriate steps. He believes higher yields can draw foreign capital, particularly into government bonds (SBN). "If portfolio inflows increasingly pour into Indonesia through SBN, the country will have greater opportunities to manage this foreign capital for programs that directly impact national productivity," Surya explained. This increased demand for rupiah, he noted, would strengthen its exchange rate against the US dollar.

Beyond short-term gains, foreign capital inflows, if managed productively, can expand financing for economic development. Surya also pointed to the benefits of state cash management at Bank Indonesia, which aims to maintain liquidity and could generate revenue for the government through remuneration schemes. However, he cautioned that the policy's success hinges on the financial system's ability to channel this liquidity to the real sector. "The government needs to be careful in managing this policy. State cash management at the central bank must be channeled as additional liquidity to the banking system. This policy also needs to be accompanied by a reduction in benchmark interest rates so that business actors can absorb capital more maximally to develop their businesses," he advised.

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The government needs to be careful in managing this policy. State cash management at the central bank must be channeled as additional liquidity to the banking system. This policy also needs to be accompanied by a reduction in benchmark interest rates so that business actors can absorb capital more maximally to develop their businesses.

Ultimately, Surya stressed that close coordination between fiscal and monetary policies is essential for the effectiveness of rupiah-strengthening measures. Such synchronization, he believes, will foster positive market sentiment and boost investor confidence in Indonesia's economic prospects. "Without close coordination, policy options to increase domestic financial instrument yields and maintain financial-banking market liquidity will never be achieved," he stated. The greatest future challenge lies not only in policy formulation but also in consistent implementation.

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Without close coordination, policy options to increase domestic financial instrument yields and maintain financial-banking market liquidity will never be achieved.