2019 State Budget Assumes Highest Rupiah Exchange Rate in 11 Years

The House of Representatives (DPR) and the government have agreed not to change the exchange rate assumption in the 2019 State Budget Draft (RAPBN), which is set at Rp 14,400 per US dollar. However, the government has taken into account the rupiah's sensitivity to changes in the state budget.

The rupiah exchange rate assumption in the 2019 RAPBN is higher than that in the 2018 APBN, which was Rp 13,400 per US dollar. However, this rupiah exchange rate is still below the Jakarta Interbank Spot Dollar Rate (JISDOR) at 14,908 per US dollar (September 18th). The persistent pressure in the global market, coupled with uncertainty in the financial markets, has led the government to peg the rupiah exchange rate above Rp 14,000 per US dollar in the RAPBN. This is the highest level in the last eleven years, as shown in the graph below.

As is known, the rupiah exchange rate has been traded in the range of Rp 14,900 per US dollar in recent weeks. Concerns about the trade war, the crises in Argentina and Turkey, and Indonesia's trade and current account deficits have caused the rupiah to weaken against the US dollar. According to Bloomberg data, for three-month forward contracts, the rupiah exchange rate has reached Rp 15,271 per US dollar, and for six-month forward contracts, it is traded at Rp 15,564 per US dollar. This indicates that the pressure on the rupiah will remain considerable next year.