Indonesia Rupiah Hits 16,985 as Prabowo Family Nomination Sparks Independence Fears
Indonesia's Rupiah hit a near-30-year low of 16,985 as President Prabowo's nomination of his nephew to the central bank sparks fears over independence.
A critical psychological barrier is under siege. The Indonesian rupiah plummeted to its weakest level since the 1998 Asian financial crisis on Tuesday, momentarily hitting 16,985 against the U.S. dollar. This slide reflects deep-seated market anxiety over the country's economic direction and the perceived erosion of institutional independence.
Indonesia Rupiah 16,985 Exchange Rate: The 'Nephew' Effect
Investors are reacting sharply to reports that President Prabowo Subianto has nominated his nephew, Thomas Djiwandono, to the board of Bank Indonesia (BI). Djiwandono, who currently serves as deputy finance minister, is eyed for the deputy governor post recently vacated by Juda Agung. According to Reuters, this move is seen as a 'role swap' between the ministry and the central bank, raising red flags about political interference.
Finance Minister Purbaya Yudhi Sadewa dismissed these concerns, stating that the nomination wouldn't hurt institutional integrity. However, the currency’s performance tells a different story. In 2025, the rupiah was among the worst-performing emerging market currencies with a 3.5% decline, and it's already dropped nearly 2% this month.
Fiscal Red Flags and the Exit of Sri Mulyani
The market's skepticism is rooted in a broader shift toward populist economic management. The removal of Finance Minister Sri Mulyani Indrawati in September 2025 signaled the end of conservative fiscal stewardship. Sri Mulyani, a former World Bank executive, reportedly clashed with Prabowo over his expansive spending plans.
Prabowo’s agenda includes an ambitious 8% GDP growth target, increased defense spending, and a costly free meal program. Last month, the administration recorded a 2025 budget deficit of 2.92% of GDP—perilously close to the 3% legal limit established after the late 90s crisis. Economist Teuku Riefky of the University of Indonesia warned that these policy-making processes are causing international investors to lose faith in the economy's health.
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