Deliberately weakening a national currency to spur economic growth is a high-risk strategy that, for an import-dependent nation like Indonesia, typically triggers inflation and erodes purchasing power. While some social media narratives suggest a depreciated rupiah could boost competitiveness, economic experts and trade data indicate that such a policy increases the government’s debt burden and raises costs for essential imports, ultimately hindering development rather than accelerating it.
Why a Weaker Currency Does Not Guarantee Growth
Proponents of currency depreciation often point to the United States or China, suggesting that a weaker dollar or yuan benefits export competitiveness. However, I Wayan Nuka Lantara, a lecturer at the Faculty of Economics and Business at Gadjah Mada University (UGM), argues that Indonesia’s economic structure makes this comparison flawed. Unlike major global economies with high levels of domestic production, Indonesia remains heavily reliant on imported raw materials and energy.
When the rupiah loses value, the cost of these imports rises immediately. According to UGM’s Lantara, this creates a domino effect: higher import costs lead to increased domestic prices, which fuels inflation and diminishes the purchasing power of the average citizen. Rather than fostering innovation, an unstable currency often forces businesses to focus on surviving rising operational costs.
Data from the Ministry of Trade shows that imported soybean prices rose by 1.04 percent in a single month during the mid-2026 currency fluctuations. In regions like Maluku, the impact was even more severe, with prices climbing by 12.50 percent.
The Fiscal Impact on National Debt and Subsidies
A weakening rupiah complicates the government’s fiscal policy by increasing the cost of servicing foreign-denominated debt. Because a significant portion of Indonesia’s debt is held in US dollars, a depreciation of the rupiah means the government must allocate more local currency to meet the same debt obligations.
Moh. Najikhul Fajri, a monetary economics researcher at Diponegoro University (Undip), notes that this creates a direct conflict with national social programs. As the value of the rupiah falls, the budget required for energy and food subsidies expands. This reduces the “fiscal space” available for other developmental projects, such as the government’s free nutritious meal programs. Fajri emphasizes that for a currency devaluation strategy to work, a country must be a net exporter of high-demand goods—a position Indonesia has not yet reached due to its nearly equal volume of imports and exports.
Investor Confidence and the Stock Market
The Composite Stock Price Index (IHSG) serves as a primary barometer for global investor sentiment. Recent performance data reveals a stark contrast between Indonesia and its regional neighbors. While neighboring markets like Thailand and Singapore saw gains or relative stability in mid-2026, Indonesia’s IHSG experienced a sharp decline of 15.31 percent over one month, according to Yahoo Finance data.
This volatility highlights the risks of perceived economic instability. Investors typically retreat from markets where currency fluctuations threaten profit margins and increase operational uncertainty. For Indonesia to achieve the status of a developed nation, experts suggest that focus must shift toward long-term pillars: improving human resource quality, fostering genuine technological innovation, and increasing total factor productivity.
When evaluating economic advice on social media, verify the source’s background. Economic policy is complex; strategies that function for a reserve currency issuer like the US often produce the opposite effect in emerging markets.
Frequently Asked Questions
Does a weaker currency always help exports?
Not necessarily. While it can make exports cheaper for foreign buyers, it simultaneously makes imported raw materials more expensive for domestic producers. If a country imports more than it exports, the net effect is usually negative.
Why did the rupiah’s decline affect food prices?
Indonesia relies on imports for several key agricultural commodities, such as soybeans. When the rupiah weakens, importers pay more for these goods in US dollars, and those increased costs are passed on to consumers at the market level.
Is Indonesia’s economic strategy similar to the US?
No. According to researchers at Diponegoro University, Indonesia lacks the economic capacity to emulate US monetary policy because of the high volume of domestic imports. The US economy is fundamentally different in terms of global trade influence and reserve currency status.
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