SINGAPORE, Jan 20 — Indonesia’s rupiah hit a record low today as concerns over the central bank’s independence resurfaced amid lingering fiscal worries that have kept investors nervous about Southeast Asia’s biggest economy.
The latest bout of weakness in the rupiah, which slid to 16,985 per United States dollar today, came after President Prabowo Subianto nominated his nephew to join Bank Indonesia’s (BI) board of governors.
The currency is down nearly 2 per cent in January after dropping 3.5 per cent in 2025 and was last at 16,965. The yield on 10-year Indonesia government bonds was 3.3 basis points higher at 6.33 per cent, an over-three-month high.
Prabowo’s nephew Thomas Djiwandono, currently a deputy finance minister, is one of three nominees whose names have been submitted to parliament, presidential spokesperson Prasetyo Hadi told reporters yesterday.
The focus will now switch to BI’s policy meeting tomorrow, where analysts expect BI to stand pat on rates.
Indonesia’s widening budget deficit has worried investors.
Trinh Nguyen, senior economist for emerging Asia at Natixis Corporate & Investment Banking, expects the rupiah to underperform other Asian currencies in the short term due to investors demanding a higher risk premium for the economy.
“Concerns preceded the appointment as investors questioned the lunch programme and the impact on Indonesia’s bright spot — which is low fiscal debt and hard rule on 3 per cent fiscal deficit on GDP.”
“Now with the appointment of his nephew, Bank Indonesia will be under pressure to ease monetary conditions. But with the rupiah weak, we do not expect the central bank to cut,” Nguyen said.
Budget deficit woes
Markets were stunned in September when Prabowo abruptly removed Indonesia’s influential finance minister Sri Mulyani Indrawati, as investors feared that the hard-fought fiscal credibility could soon be eroded.
That also brought BI and its autonomy into the spotlight as investors fretted that independent monetary policymaking in Indonesia might be under pressure, with Prabowo targeting economic growth of 8 per cent by 2029 from about 5 per cent currently.
Foreign investors sold a net roughly $6.4 billion worth of Indonesian government bonds in 2025, adding to the pressure on the currency.
At 2.92 per cent of GDP, the 2025 budget deficit was the widest in at least two decades outside the pandemic years and close to the statutory cap of 3 per cent of GDP.
Daniel Tan, portfolio manager at Grasshopper Asset Management, said Prabowo’s move to appoint his nephew has further sparked jitters among investors concerned about erosion of central bank independence.
“The nomination (of Prabowo’s nephew) added to existing concerns that Indonesia’s budget deficit cap could be raised,” Tan said.
