We would appreciate your comments
Business
BI Fortifies Rupiah As Global Turbulence Triggers Capital Outflows
Bank Indonesia intervenes in onshore and offshore markets to curb Rupiah volatility, as global uncertainty sparks over $5 billion in portfolio outflows.
Jakarta - Faced with a challenging global financial climate, Bank Indonesia has taken decisive action to shield the domestic economy from external volatility. From September 2025 to October 20, the nation witnessed net portfolio investment outflows totaling $5.26 billion, a movement directly linked to heightened global uncertainty. This capital flight exerted pressure on the Rupiah, prompting the central bank to execute a series of measured and strategic interventions across multiple foreign exchange markets to ensure stability. The proactive stance underscores BI's commitment to maintaining orderly market conditions and preserving the value of the national currency.
The central bank's stabilization toolkit is multifaceted. BI has conducted interventions in both the spot market and the offshore Non-Deliverable Forward (NDF) market. Domestically, it has also utilized the Domestic Non-Deliverable Forward (DNDF) market and engaged in purchasing government securities (SBN) in the secondary market as part of its stabilization efforts. These calibrated actions yielded positive results, with the Rupiah strengthening to Rp16,585 per US dollar by October 21, 2025, recovering from its weakened position in September.
A critical supporting policy has been the strengthening of regulations on Foreign Exchange Proceeds from Natural Resources Exports (DHE SDA). This policy mandates exporters in key commodity sectors to convert their foreign exchange earnings into Rupiah, increasing the supply of US dollars in the domestic market and directly bolstering the local currency. This structural measure complements BI's direct market interventions, creating a more sustainable foundation for exchange rate stability.
Indonesia's robust external buffers provide essential space for these defensive operations. The country's foreign exchange reserves remained strong at $148.7 billion as of the end of September 2025. This substantial reserve position, equivalent to financing 6.2 months of imports, stands significantly above the international adequacy standard and offers BI significant firepower to manage periods of market stress without destabilizing the broader economy.
The origin of the recent market pressure is largely external. The global economic slowdown, exacerbated by the United States' implementation and threat of new tariffs, has increased financial market uncertainty worldwide. This environment has triggered a risk-off sentiment among international investors, leading to capital withdrawals from emerging markets like Indonesia, even as the country's domestic economic fundamentals remain relatively sound.
Concurrently, BI is pursuing an expansionary liquidity policy to support the domestic financial system and economic growth. The central bank has steadily reduced its holdings of short-term monetary instruments (SRBI), thereby injecting more Rupiah liquidity into the banking sector. Furthermore, its program of purchasing government bonds in the secondary market, which reached Rp268.36 trillion, also serves to maintain market liquidity and stability.
The strategic management of the Rupiah is inseparable from Indonesia's inflation control framework. A stable currency helps keep imported inflation low, which has been a contributing factor to the well-contained core inflation rate of 2.19%. By successfully mitigating extreme currency volatility, BI supports its primary mandate of price stability, creating a more predictable environment for business and consumption planning.
Moving forward, Bank Indonesia's policy direction remains vigilant and data-dependent. The central bank has stated it will continue to carefully assess the effectiveness of its policy transmission, the prospects for growth and inflation, and the stability of the Rupiah. This comprehensive approach, balancing defensive forex actions with supportive liquidity measures, aims to navigate ongoing global turbulence while safeguarding Indonesia's macroeconomic stability.
(Hashim Zafran)
Read Too: Pertamina Fuels Shell's Return: 100,000-Barrel Deal Ends Gasoline Drought
Tag:
Comments are your responsibility according to the ITE Law.
