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Weakening Rupiah: Lowest Level in 20 Years

On Monday (3/9), rupiah hit its lowest level since the Asian financial crisis in 1997-1998, dropping 8,93% since the start of the year. The weakening of rupiah continued to level 14.935 per US dollar on Tuesday (4/9) or nearly 15.000. As of today, Friday (7/9), rupiah fell slightly to 14.958 per US dollar. In 2018, rupiah has been among the worst performing currencies in the region. The panic amidst the emerging markets has been triggered by the crisis that hit Turkish lira.

However, the weakening of rupiah against US dollar should not be greeted with panic. This should be the momentum for Indonesian citizens to be united as a country. As of this moment, various programs are being processed so that the decline in the value of the rupiah could be controlled. Efforts made by the government include stopping imports of luxury goods and delaying the construction of infrastructure that has large amount of imported goods. Rupiah depreciation did not occur drastically. It can be seen that in September 1997, the rupiah exchange rate was at a value of Rp 3.030 per US dollar. Within a year, the value of the rupiah plummeted to the level of Rp 10.725 per US dollar in September 1998.

There are some effects of the depreciation of Rupiah, one of them being the weakening competitiveness of Indonesian products both domestic and export because some industrial sectors depend on imports of raw materials and capital goods. The next outcome is the increasing burden of installment payments, interest of government and corporate foreign debt. The weakening of the rupiah is also a bad news for a number of stock issuers, namely those that have debt costs in US dollars. Companies that use a lot of imported raw materials are also affected because the increase of US dollar against the rupiah makes them have to pay higher import costs.

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