A call for war
The Indonesian Government has in fact made a correct move with its decision to de-dollarize, however possible. Less-than-optimal economic conditions and environmental challenges inevitably weigh down on Rupiah volatility, mainly because reliance on the US dollar in the overall Indonesian economy remains high and even strengthening.
Import transactions of goods and services, as well as debt payments, still depend excessively on the US dollar. It thus comes as no surprise that when Indonesia is buying and selling, US dollar movement is unpredictable and out of control. Urgent market interventions by Bank Indonesia (the nation’s central bank) seem feeble and ineffective in suppressing frantic Rupiah movement.
As oil and gas import demand surges, onerous dependence on the US dollar looms larger day by day, and foreign debt payments soar skyward. If the Government and monetary policy authorities do not boldly impose strategic steps, this dependency will only exacerbate. The result is that hapless economic stakeholders will face ever more growing risks in conducting business.
It thus stands to reason that Government de-dollarization measures at a bilateral level are a logical strategic step, and should be accorded full support by economic and business stakeholders. Without a doubt, agreements on bilateral trade transactions evading the US dollar need to be more diligently explored.
Bear in mind however that de-dollarization is frankly not without its own set of risks. An innocent agreement to de-dollarize between two countries or businesses therein will easily sound like a call to war.
It will appear as though the Government of Indonesia is intent on fighting head-to-head against US economic hegemony, which has been ruling world currencies since the end of World War II. This might well spark a negative reaction from the US and its client countries.
Therefore, to anticipate such a reaction, our Government needs to implement mitigation measures sensitively, to counter potential adverse reactions from the US and its subject states.