The Indonesian rupiah yesterday fell to its lowest level since the Asian financial crisis of 1998, reflecting concerns about the government’s fiscal trajectory and the uncertainties about incoming U.S. tariffs.
According to The Jakarta Post, the rupiah momentarily fell to around 16,654 against the U.S. dollar, its weakest since June 1998, before recovering slightly. The currency has been one of the worst performers in emerging markets in 2025, declining by more than 3 percent since the start of the year.
Tuesday’s reading was slightly lower than the previous low of 16,640 to the U.S. dollar, which was recorded in March 2020, at the beginning of the COVID-19 pandemic. The rupiah is now on track to fall below the all-time low of 16,800 recorded in June 1998.
A number of factors have contributed to the rupiah’s poor performance. These include concerns over President Prabowo Subianto’s economic agenda, which has involved a loosening of the economic safeguards implemented in the wake of the Asian financial crisis of 1997-1998. In particular, Prabowo’s expansive fiscal policy, which includes a multibillion-dollar free lunch program and his ambitious plan of achieving 8 percent annual GDP growth across his five-year term, has pushed the country closer to the limits of its fiscal deficit and debt-to-GDP ratio ceilings. This has been underscored by lower than expected tax revenues, which fell by 42 percent year-on-year in January.
Markets have also been shaken by the rumored resignation of Finance Minister Sri Mulyani Indrawati, an internationally respected steward of the Indonesian economy who Prabowo appointed last year in part to calm fears about his administration’s populist economic agenda. These rumors partly accounted for last week’s bloodshed on the benchmark Jakarta Stock Exchange Composite Index, which fell more than 7 percent in a single day’s trading on March 19. This forced the bourse to halt trading for the first time since 2020, and Sri Mulyani to call an impromptu press conference to deny the rumors that she had stepped down.
At the same time, investors have been notably wary about Indonesia’s new sovereign investment fund, Danantara. The fund launched with a whimper in late February, after which shares in Indonesia’s state-owned banks fell sharply.
According to Bank Indonesia (BI), all of these factors have been compounded by the economic uncertainties at the global level, in particular, the U.S. Federal Reserve’s “hawkish policy stance” and the Trump administration’s sharp protectionist turn. Since President Donald Trump took office in January, his administration has imposed tariffs on several major trading partners, including China, Mexico, and Canada, and is set to announce more tariffs on April 2.
Triwahyono, a senior official at BI, told the Jakarta Post that the rupiah’s plunge “was brought about by the global factor that is still filled with uncertainties.”
Fitra Jusdiman, BI’s director of monetary and securities asset management, told Nikkei Asia that the bank will continue intervening in the market to maintain investor confidence. “We are deploying triple intervention measures, stepping in the spot currency market, the domestic non-deliverable forward market, and the government bond market,” Jusdiman said.