Coordinating Minister for Economic Affairs Airlangga Hartarto said on Wednesday that his ministry is preparing a stimulus package to lessen the effects of the Pertamax price hike.
“It’s still being prepared. Once a decision has been made, we’ll let you (the public) know. I have to report to the president first,” Airlangga told journalists.
On negative international narratives such as “Sell Indonesia”, Eko from INDEF said the government needs to respond more carefully by using data, and through policy corrections that align with market logic.
He said officials should not answer criticism from foreign media or investors defensively or emotionally.
Investors and rating agencies were mainly worried about fiscal sustainability, including large debt maturities and whether government revenue would be enough to meet spending needs, Eko said.
The way to stop a “Sell Indonesia” narrative and restore credibility in the longer term was to show credible fiscal correction, reduce policy surprises and avoid statements that appear hostile to foreign investors, he said.
“Answer the criticism by showing better performance,” he said.
Several analysts pointed to the free nutritious meal programme, known locally as MBG, as a central concern because of its large budget allocation and recent graft case concerning its sacked heads.
Bhima said the programme, originally set to cost 335 trillion rupiah this year but has since been cut to 268 trillion rupiah, should be placed under a short-term moratorium, alongside a pause in other large projects, while the government designs stimulus measures and evaluates budget efficiency.
He said that without a legal and transparent mechanism to revise spending, statements about cutting or improving programmes would be seen as cosmetic.
Faisal from CORE Indonesia also said the free meal programme should not only be reduced but made more targeted and effective, while proving that it did not add fiscal risk.
Eko said the government should ensure ideas are tested before being announced, and use any savings from large programmes to cushion the public from the effects of rupiah weakness and rising costs.
For ordinary Indonesians, a weaker rupiah and a falling stock market may feel distant at first, said observers.
But they said the pressure can eventually show up in higher prices for imported goods or locally produced items with imported components, such as staple foods like tofu and tempe, higher fuel or transport costs, higher borrowing costs, slower business activity, and weaker hiring.
Bhima said while malls and cafes in big cities are still crowded, it should not automatically be read as a sign of a healthy economy.
Instead, he said, it could be part of a phenomenon in which people continue buying small luxuries or affordable pleasures because larger goals, such as buying a home, saving for education, or building long-term security, feel increasingly out of reach.
The government is trying to boost the economy by holding a nationwide shopping sale from Jun 8 to Jul 12, offering discounts of up to 50 per cent, involving around 800 brands, 80,000 retail outlets, and at least 414 malls and retail centres across 24 provinces.
The initiative is designed to stimulate household consumption and create wider economic impact for businesses and tourism players, the ministry of tourism said in a statement. It views the current exchange rate situation as an opportunity to attract regional visitors, such as from Malaysia, Singapore and Brunei.
At the end of the day, experts said Indonesia has the tools to calm the markets but confidence will return only if investors and the public see that the government is willing to acknowledge problems and fix them.
“The rupiah and JCI were worsened by several government policies that were not firm, not well socialised, and had no market test,” said Eko.
“I think what we really need to do now is reduce new policies that have the potential to become new polemics in the market. New ideas have to be tested first,” said Eko.
