The rupiah exchange rate, which recently reached Rp18,200 per US dollar based on Bank Indonesia’s Transaction Rate, has raised concerns about the national economy. The weakening rupiah is expected to drive up the prices of food and consumer goods, a significant portion of Indonesia’s food supply relies on imports. At the same time, rising fuel prices are placing additional pressure on middle-class households, industries, and businesses.
Denni Puspa Purbasari, an economist from UGM’s Department of Economics, Faculty of Economics and Business (FEB UGM), explained that one factor putting pressure on the economy is the disruption of global energy supply caused by geopolitical conflicts in the Middle East, particularly disruptions to oil distribution routes through the Strait of Hormuz. According to her, oil and gas supply disruptions directly affect industries that rely heavily on energy and petroleum-based raw materials, such as the petrochemical industry.
“When oil prices rise, companies will assess whether they can pass those costs on through higher prices,” she said during Expert Talk titled “Pelemahan Nilai Tukar Rupiah terhadap Dolar AS” (The Depreciation of the Rupiah Against the US Dollar) on Wednesday (Jun. 10).
Denni added that several companies have begun experiencing financial pressure because rising production costs cannot be fully offset by higher selling prices. She hopes the government will continue to strengthen economic diplomacy, expand alternative energy sources, and maintain domestic policy certainty to avoid adding burdens on businesses.
Denni believes the government is likely prioritizing domestic fuel supply through state-owned enterprises. Although such measures may not directly solve supply issues faced by the private sector, fuel availability remains crucial for supporting overall economic activity.
“Even if diplomatic efforts are focused on the needs of state-owned enterprises, the private sector still benefits because businesses also depend on fuel availability to operate their equipment,” she explained.
In addition to strengthening international diplomacy, she argued that Indonesia must secure energy supplies from competitive alternative sources. Under current conditions, ensuring supply availability should be the primary concern, while price considerations come second.
Meanwhile, Wisnu Setiadi Nugroho, a lecturer at FEB UGM, highlighted several government measures already introduced, including import duty exemptions for certain industrial sectors. However, information regarding the effectiveness of these policies has not been clearly communicated to the public.
“The problem is not only the weakening rupiah but also rising global commodity prices. Therefore, reducing import duties alone may not be the primary solution,” he said.
According to Wisnu, current conditions require diversifying import routes, strengthening support for domestic production, and enhancing regional economic cooperation. He believes Southeast Asia has the potential to strengthen its internal supply chains and reduce dependence on imports from outside the region.
On the other hand, Wisnu noted that middle-class households are among the groups most affected by rising prices of non-subsidized fuel. He further pointed out that the barcode-based fuel subsidy policy, when integrated with tax data, could exclude many middle-income households from receiving subsidies.
He estimated that transportation costs alone could increase household expenditures by 15–20 percent if consumption patterns remain unchanged. The impact could be even greater if accompanied by increases in the prices of other goods and services.
“These vulnerable middle-class groups generally do not receive social assistance. When prices rise significantly, the effects are immediately reflected in household spending,” he said.
Another FEB UGM lecturer, Evi Noor Afifah, stated that the weakening rupiah could also affect broader macroeconomic indicators. Mounting pressures on businesses may lead to lower investment levels and reduced aggregate demand, ultimately slowing economic growth.
“As academics, we can anticipate that economic growth may decline in the coming period. If we expect growth to reach the levels targeted by the government, the weakening exchange rate presents a significant challenge,” she said.
Evi also emphasized the importance of government transparency regarding energy supply conditions and mitigation measures. Credible information is essential so both the public and businesses can respond appropriately to the situation.
“There also needs to be a more credible and transparent flow of information,” she said.
Meanwhile, another FEB lecturer, Muhammad Nabiel Arzyan, highlighted the importance of expanding Local Currency Transactions (LCT) with trading partners as a strategy to mitigate risks. He emphasized that exchange rate issues are fundamentally structural and cannot be resolved through monetary instruments alone.
“The use of local currencies can serve as one risk mitigation mechanism. However, the rupiah exchange rate issue is, at its core, a much more structural challenge,” he explained.
Regarding fiscal impacts, Nabiel noted that rising global oil prices and the weakening rupiah have placed additional pressure on the state budget, particularly on energy subsidy and compensation spending. Based on budget realization data through the end of May 2026, energy subsidies and compensation had already reached approximately 45 percent of the annual state budget allocation.
“This situation is quite unique and still allows for various possible scenarios, especially given how strongly both oil prices and the rupiah are affected by ongoing developments,” he said.
Author: Hanifah
Editor: Gusti Grehenson
Post-editor: Jasmine Ferdian
Photo: Antara