REPUBLIKA.CO.ID, JAKARTA -- Head Of Fixed Income Research PT Sinarmas Sekuritas (SimInvest) Aryo Perbongso stated that comprehensive coordination between Bank Indonesia (BI) and the government is essential to stabilize the rupiah exchange rate and implement growth-oriented policies that are pre-emptive.

This is due to tensions in the Middle East between Iran and the Israeli regime that pose risks to the Indonesian market, exacerbated by the potential impact of rising oil prices of up to 100 US dollars per barrel, capital outflows, and the depreciation of the rupiah.

“The government and Bank Indonesia face a dilemma in choosing between a growth policy and stabilizing fiscal costs to manage the value of the rupiah. Maintaining the BI Rate in the midst of these challenges can signal support for economic growth, but it can lead to increased fiscal costs,” he said, quoted from an official statement in Jakarta, Wednesday (24/4/2024).

At the current exchange rate, he added, it judged that it was highly likely that the BI rate could still be sustained in April 2024, given the dividend payment cycle that is still ongoing. Along with this, there are concerns that the current increase in BI Rate may not provide significant effectiveness.

The scenario that is considered possible for BI and the government to stabilize the value of the rupiah is to maintain the BI rate and increase the yield on the SBN.

“By maintaining BI Rate, it means supporting Indonesia's economic growth compared to raising interest rates, although this may lead to an increase in the fiscal cost of the State Budget (State Expenditure Revenue Budget) due to higher SBN yields,” Aryo said.

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