JAKARTA, May 18 — The Indonesian rupiah slid to a fresh record low today as stocks slumped and global oil prices hit two-week highs, while President Prabowo Subianto said the economy was strong and the currency’s decline would not affect villagers because they did not use US dollars.
The rupiah fell more than 1 per cent to a record low of 17,668 per US dollar in early trading today. Even before the Iran war, Indonesia’s currency and equities were under pressure from investor concerns over the government’s spending plans, market transparency and central bank independence.
Jakarta’s main stock index fell more than 4 per cent as trading resumed after a holiday weekend, following global index provider MSCI’s decision to remove more than a dozen companies from its Indonesia indexes last week.
On Saturday, Prabowo spoke about the rupiah’s weakness at two events during a visit to East Java province, repeatedly saying villagers were not affected by it because they do not transact in US dollars.
“As long as Purbaya can smile, no need to worry,” Prabowo said, referring to his finance minister, Purbaya Yudhi Sadewa, at the launch of a government programme to build cooperatives in villages across the country.
“However many thousands of rupiah the exchange rate to the dollar is, you folks in villages do not use the dollar anyway,” he said.
“Believe that our economy is strong, our fundamentals are strong. Whatever people say, Indonesia is strong,” he added.
In a separate speech, Prabowo stressed that Southeast Asia’s largest economy has sufficient food and energy supplies, while criticising those who said the rupiah’s decline signalled economic weakness.
“Many countries are panicking but Indonesia is still okay,” he said.
Indonesia has increased its fuel subsidy budget to cushion the impact of rising global crude prices.
The central bank has also been intervening in the foreign exchange market to support the rupiah. Bank Indonesia is scheduled to hold its monthly monetary policy review on Wednesday.
