Jakarta. Rupiah’s slide past Rp 17,600 per US dollar reflects mounting fiscal and structural concerns at home rather than purely monetary pressures, according to an economist at the University of Indonesia’s Institute for Economic and Social Research (LPEM FEB UI).

Teuku Riefky said the currency weakness shows the government’s fiscal room is narrowing as higher global oil prices push up fuel subsidy costs while tax revenues remain relatively low.

“The fiscal issue lies in the shrinking fiscal space caused by rising fuel subsidy burdens amid higher oil prices and weak tax revenues,” Riefky said on Monday.

He said fiscal pressures are intensifying as the government ramps up spending for flagship programs such as the Free Meal Program (MBG) initiative and the Red and White Village Cooperatives (KDMP).

Beyond fiscal risks, Riefky also pointed to structural issues that have weighed on investor confidence in Indonesia’s economy. He said frequent policy shifts by the government have created uncertainty in the market and pressured sentiment toward domestic assets, including the rupiah.

As a result, he argued that Bank Indonesia’s stabilization efforts, including monetary intervention and its seven rupiah stabilization measures, would remain limited unless fiscal problems are addressed first.

Riefky also said Finance Minister Purbaya Yudhi Sadewa’s Bond Stabilization Fund (BSF) scheme is unlikely to deliver significant impact if fiscal and structural weaknesses persist.

“The issue does not stem from monetary policy, but rather from fiscal and structural aspects,” he stressed.

To maintain long-term rupiah stability, Riefky said Indonesia needs to pursue structural reforms consistently. In the near term, he urged the government to improve the fiscal posture through spending refocusing and budget reallocation.

He said the budgets allocated for the MBG and KDMP programs should be reviewed so fiscal resources can be redirected toward sectors with more direct impact on public welfare and economic growth.

“The fiscal posture should be improved by refocusing and reallocating spending from less productive budget items toward social assistance and productive expenditure,” he said.

Still, Riefky acknowledged that external pressures remain a major trigger behind the rupiah’s decline, particularly rising geopolitical tensions in the Middle East.

Tensions escalated following reports that the US and Israel are preparing possible follow-up strikes against Iran after indirect negotiations between Iran and US President Donald Trump stalled.

“There are both external and internal factors. Externally, the pressure comes from the Iran-US conflict. Internally, it stems from fiscal and structural issues,” Riefky said.

Bloomberg spot market data showed the rupiah weakened 71 points, or 0.4%, to Rp 17,668 per US dollar on Monday, while the dollar index slipped 0.07% to 99.21.