JAKARTA (TheInsiderStories)—The rise of Bank Indonesia’s (BI) interest rate by 25 basis points (bps) to 4.50 per cent was unable to hold rupiah weakening, as investors are more concerned with Indonesia’s current account deficit.
Bank Indonesia raised on Thursday its key interest rate by 25 basis point (bps) to 4.50 per cent for the first time since 2014 to support the rupiah and stabilize domestic markets. The Indonesian Central Bank also raised its deposit facility rate by 25 basis points to 3.75 percent, and its lending facility rate by 25 basis points to 5.25 percent.
But despite of the interest rate rise, the rupiah continued weakening against US Dollar. Based on the reference of Jakarta Interbank Spot Dollar Rate (Jisdor), rupiah weakened to Rp14,107 per US Dollar on Friday (18/5), from Rp14,074 in the previous day. In the year to date, the rupiah has weakened 3.7 percent against the US dollar.
Investors are apparently disturbed by Indonesia’s current account as it reflects foreign reserve from trade. Foreign reserve from the trade is more sustainable to support exchange rate rather than capital flows in the capital market.
Indonesia recorded deficit of US$5.5 billion, or 2.15 per cent of GDP, in the first three months this year.
The country posted a surprise US$1.63 billion trade deficit in April 2018, the largest since $1.96 billion in April 2014. In total, the country’s import in April 2018 was up 34.86 per cent to US$16.09 billion from $11.95 billion in April 2017, while export dropped by 7.19 per cent to $14.47 billion from $13.27 billion in the same period last year.
The result in April swung Indonesia’s trade balance in the first four months of 2018 to a deficit of $1.31 billion from a surplus of $5.43 billion in the same period last year.
Thailand Baht remain solid against US Dollar due to surplus current account. Thailand recorded 124,83 billion Thailand Baht (US$3.88 million) by May 17, 2018. Thailand Baht strengthened against US Dollar by 0.25 per cent to 32.170 per US Dollar at 4.44 p.m.
Meanwhile, Finance Minister Sri Mulyani insisted the rupiah weakening is driven by external, especially the US normalization policies that have a global impact. She explained the internal economy remains positive, indicated by state expenditure that reached Rp582.9 trillion in April 2018, or 26.3 per cent from a total of Rp2,220.7 during 2018. It consists of central government expenditures of Rp331 trillion and transfers to regions and village funds of Rp251.9 trillion.
In terms of income, Indonesia recorded Rp416.9 trillion in tax revenue and Rp109.9 trillion in non-tax revenue by April 2018. In addition, state budget deficit reached Rp55.12 trillion or 0.37 per cent of GDP by the end of April.
Mulyani ensured the government will keep the 2018 state budget deficit at 2.19 percent as predicted or expected to be lower than 2 percent.