Mahawan Karuniasa
Environmental Expert, Universitas Indonesia
There is a threshold to the rupiah’s depreciation that can no longer be ignored, as it risks breaching the limits of social patience and shifting the priorities of development transformation away from a sustainable Indonesia. Warning signs must be read earlier and with utmost honesty.
The Depreciating Rupiah and Eroding Foreign Exchange Reserves
In the context of the current situation under a severe stress scenario—particularly if the weakening of the rupiah, capital outflows, rising imports, and stabilization interventions occur simultaneously—the rupiah exchange rate has the potential to breach Rp20,000 per US dollar by the end of 2026 or early 2027, moving from its late May 2026 level which already approached Rp18,000 per US dollar.
A rupiah range at this level can be understood as a dangerous psychological and structural zone. At that point, the depreciation of the rupiah will begin to impact energy costs, imported food, industrial raw materials, debt service payments, and inflation expectations. Confidence in macroeconomic stability could shift from “managed” to “vulnerable to crisis.”
Foreign exchange (forex) reserves serve as a critical buffer for the state to pay for imports, maintain exchange rate stability, service external obligations, and signal that the economy retains resilience. One of the thresholds frequently used to gauge external vulnerability is the capacity of forex reserves to finance approximately three months of imports.
Currently, forex reserves are estimated to remain at an adequate level of USD 146.2 billion, equivalent to 5.8 months of imports, based on the position at the end of April 2026. However, under current trends and a heavy-stress scenario—where import demands rise, forex reserves are continuously utilized for stabilization, external debt obligations increase, and capital outflows remain significant—a drop to a three-month import capacity could become a real risk within 1–2 years. Statistics Indonesia (BPS) recorded that the import value for January–March 2026 rose by approximately 10% compared to the same period in the previous year, indicating that the foreign exchange required for imports is indeed increasing. If Indonesia moves toward a situation where forex reserves only cover three months of imports, the economy will enter a hazardous zone as external defense buffers narrow significantly.
Rising Prices, Waning Patience
There is no single, universal inflation figure that automatically triggers demonstrations or unrest. Global dynamics indicate that rising fuel and food prices in developing and low-income countries correlate with increased anti-government demonstrations, riots, and civil conflict.
For a developing country like Indonesia, the social risk zone typically begins to emerge when annual inflation breaches the 5–7% range, particularly when driven by food prices, fuel, transportation, and weakening purchasing power. The risk becomes far more severe when inflation escalates further, entering a socio-political crisis zone if inflation reaches double digits—especially if it coincides with price hikes in basic commodities, unemployment, inequality, and low public trust.
Food, fuel, LPG, transportation, and electricity tariffs are goods and services whose price changes are immediately felt by poor households, informal workers, university students, laborers, and the vulnerable middle class in Indonesia.
Empirical experience in Indonesia demonstrates that major demonstrations can occur even before inflation reaches double digits, provided the catalyst is a socially highly sensitive price. In 2022, protests emerged amid the momentum of subsidized fuel price hikes, when August inflation was still at 4.69%, before subsequently rising to 5.95% in September 2022 due to fuel price adjustments. In 2013, fuel-related protests occurred when annual inflation reached approximately 8.38%, with fuel price hikes serving as the primary contributor. In 2005, an exceptionally sharp fuel price hike triggered protests and clashes; inflation in 2005 breached double digits, reaching 17.11%, far higher than in 2004, and this surge was directly and indirectly influenced by rising fuel prices. In 1998, Indonesia’s economic-political crisis coincided with hyperinflation of around 77.63%, an economic contraction of approximately 13.1%, a sharp depreciation of the rupiah, and widespread social unrest.
Shifting Development Transformation to Crisis Management
The threshold figures mentioned above should be read as indicators for vigilance, not as mechanical boundaries that automatically trigger a crisis. However, if Indonesia’s potential crisis genuinely materializes, the path toward Indonesia Emas 2045 will face massive obstacles.
A crisis will shift development priorities from long-term transformation to short-term crisis firefighting: emergency subsidies, price stabilization, financial sector bailouts, social protection, and containment of political volatility. Consequently, investments in education, research, green industries, sustainable infrastructure, ecosystem restoration, and the energy transition could be delayed or defunded. Furthermore, a crisis could weaken investor confidence, reduce fiscal space, deepen inequality, expand the exploitation of natural resources as a shortcut to generate foreign exchange, and hinder the sustainability agenda.
The challenge becomes significantly greater because it is not merely about exiting the crisis, but ensuring that the crisis response does not sacrifice the broader trajectory toward 2045: to be economically advanced, politically and economically sovereign, and socio-ecologically sustainable.
Reclaiming the Path Toward a Sustainable Indonesia
Heading toward Indonesia 2045, development choices can no longer rest solely on chasing growth alone. Instead, they must be realigned with the grand trajectory that serves our collective interest: keeping Indonesia advanced, sovereign, and sustainable.
In the short term, leading up to 2027–2029, the most urgent priority is to ensure that macroeconomic, social, and ecological foundations remain steadfast so that Indonesia is not dragged into a systemic crisis that could disrupt the nation’s long-term journey.
Entering 2030–2035, the development agenda must be directed toward strengthening economic sovereignty through downstreaming (hilirisasi) that generates genuine added value, food and energy security, reducing dependence on strategic imports, strengthening domestic industries, and driving a green economic transition. The success of this direction must be measurable through increased national productivity, declining poverty and inequality, improved human resource quality, a higher share of low-carbon energy mix, reduced emissions and environmental degradation, accelerated ecosystem restoration, and increasingly transparent and equitable natural resource governance.
Therefore, returning to the long-term development trajectory toward Indonesia 2045 is not merely a policy option; it is the only rational path to ensure this nation becomes a high-income economy, resilient against external pressures, possesses a prosperous and just society, and pursues development that respects environmental carrying capacities.
However, realigning the direction of development must begin with a willingness to read the warning signs earlier and more honestly. It is also worth considering that while the impacts of past crises may have been “limited” to the consequences of a change in leadership, today there may well be an “additional” potential impact arising from the risks of “who the successor will be.” (*)
