REPUBLIKA.CO.ID, JAKARTA — President Joko Widodo (Jokowi) said the weakening of the rupiah against the US dollar could not be separated from external factors. He explained the increase in US interest rates, US and China trade war, and economic crisis in Turkey and Argentina gave pressure to the national currency.
“These are external factors related to the increase in US interest rates, both related to US and China trade war and crisis in Turkey and Argentina,” Jokowi said on Wednesday (Sept 5).
According to Jokowi, the weakening of the currency did not only happened in Indonesia, but also in other countries. Therefore, he emphasized that the government must be vigilant and cautious about economic impact of other countries.
In addition, he also said the government would continue to coordinate in the fiscal, monetary, industrial and business sectors. Jokowi asserted strong coordination is necessary.
"I think this strong coordination is the key so that the path is in line," Jokowi added.
Jokowi conveyed the main key to handle the current economic condition is to increase investment and also export volume. By doing so, the problem of the current account deficit can also be resolved.
Jokowi also targeted his ministers to solve the problem of the current account deficit within one year. He believed if it has been finished, then it will solve related problems.
Furthermore, Jokowi conveyed, one way to reduce imports is by implementing the biodiesel policy 20 (B20). The step is considered to reduce oil imports to 5 - 6 billion US dollars.
"Then if we use CPO ourselves for B-20, the supply to the market falls, so we expect CPO prices to also rise. This has climbed," Jokowi explained.
In addition, Jokowi said not only reduce oil imports, but also the level of domestic components (TKDN) needs to be increased. He also asked both state-owned enterprises (BUMN) and private companies to pay attention to the use of TKDN.
"If we can use all domestic components there will be a savings of 2-3 billion US dollars," said Jokowi.
Earlier, Coordinating Minister for Economic Affairs Darmin Nasution noted that the government had improved the performance of the real sector, including tourism, mining, and industry, in a bid to reduce the current account deficit. He called on the public to not compare the current depreciation of the rupiah with the situation before the monetary crisis in 1998 during which the rupiah has dropped sharply to some Rp14 thousand against the US dollar.
"Do not compare the current rate of Rp14 thousand with the situation 20 years ago. The rupiah has dropped from Rp2,800 to Rp14 thousand some 20 years ago. However, now (the rupiah) had depreciated from Rp13 thousand to Rp14 thousand," he noted after a meeting with President Joko Widodo at the State Palace here on Tuesday.
He emphasized that the government's macro economic policies are still effective to be implemented. The US dollar has reached its highest level in a week against other currencies on Monday.
The sell-off in emerging market currencies and the escalating global trade tensions have sparked demand of the greenback. The US dollar was traded higher on Tuesday morning against some currencies. The rupiah was recorded at Rp14,816 against the greenback.