Bye: Faiz Ibadillah O.A
There is a lot of discourse on the internet that states that when a leader of the country who is in charge of choosing decisions is populist and puts aside prudent decision-making, it will accelerate the event of losing the mandate of heaven. A proverb from China states that the Government is no longer able to carry out its government mandate due to incompetence and incompetence in governing, so an act of rebellion is needed to retribute the failure.
In this context, Indonesia’s monetary stability is a party that is used as a “tumbal” by regulatory uncertainty from the Government. This event was marked by an increase in Credit Default Swap (CDS) to a critical point of 90.91 on April 30, 2026, and even increased to 99.84 points on April 2, 2026. This indicates an increase in concern from investors related to Indonesia’s economic conditions. Because the nature of CDS itself is an indicator of potential credit risk (credit event), so if there is an increase in the basis point of CDS, it can indicate that there is an increase in investor concerns in holding Indonesian sovereign assets. These sovereign assets can be in the form of Government Bonds (SUN), Government Securities (SBN), or other types of government bonds.
According to Ramdhani Pratama from IDN Financials, the increase in CDS is purely due to the increase in investor perception of credit risk in Indonesia and not due to a decline in credit quality. This increase may occur because Indonesia’s credit grade is still in investment grade condition so the increase in CDS is only caused by changes in risk perception. But of course this cannot be underestimated. Because if there is an increase in CDS, investors will be more cautious about Indonesia’s economic conditions. As a result, the Rupiah will be affected by the increase in capital outflow caused by an increase in risk perception by investors.
This can be seen from the Capital and Financial Account balance sheet data in Q1 and Q2 which only obtained a net inflow of 0.2 billion USD. Net outflow recorded in Q1 of 1.7 billion USD was due to the review of credit ratings from rating agencies; Moody’s, S&P, and Fitch downgraded Indonesia’s outlook rating to a negative outlook. Not to be forgotten, the freezing of JCI stock rebalancing carried out by MSCI also caused JCI to fall by 7.35%. At the same time, the Rupiah (IDR to USD) depreciated by 19.32% (as of April 2026) with the base year of 2021. Net Inflowin Q2 2026 was also due to an increase in yields in SBN and SRBI after a sharp increase in short-term yields and long-term yields in Q1 2026. CDS in Q1 2026 also experienced a surge of 51.85% QoQ, indicating a correlation between net outflows and market perceptions of credit risk in Indonesia.
There is one quote that can describe the fluctuations in the Indonesian financial market lately,
Investing is not a discipline based on absolutes or precise mathematics. There simply aren’t enough data points available to work out the exact odd – Mohnish Pabrai
Mohnish is a veteran investor of Indian-American descent. He argues that investing does not only rely on mathematical variables to calculate precisely. But we also have to look at other variables outside of mathematics because by only calculating mathematically, we will not get precise calculations because money itself is a commodity for speculation. So investors must also “take into account” the speculation that exists in the market to help with investment analysis.
It is this speculation that I will call expectation. The shape of expectations in the market can be reflected by the risk premium that describes the risk of the financial market in the future. The higher the risk premium, the higher the perception of credit event risk in the financial market. When the risk premium increases, the CDS will also increase. Rising CDS will then cause systemic linkages that have an impact on the increase in a country’s exchange rate (Su, M., Ren, Y., Niu, Y. et al. 2025).
As Chatib Basri said in his op-ed in the Kompas newspaper, May 3, 2026;
The expectation of depreciation, once it appears, can trigger capital outflows that actually manifest depreciation itself—a self-fulfilling currency crisis – Chatib Basri
Chatib Basri in his latest op-ed also reminded of the potential Peso problem, namely about the behavior market that always remembers the traumatic experience of the crisis. Like Indonesia’s traumatic experience with the 1998 economic crisis. The peso problem is still shrouded in economic policy audiences. So that every Indonesia experiences currency depreciation, the general public also experiences a flashback to the 1998 monetary event when IDR to USD rose from 2,000 to 17,000 per 1$ in less than one month.
If we take it from Mr. Dede––his nickname, this flashback will then cause a self-fulfilling currency crisis. Because indirectly, people still have the perception that the rupiah is a weak currency. So there is a downward spiral effect from market perception to currency crisis caused by indirect expectations.
Mr. Chatib’s opinion illustrates my belief that monetary and fiscal institutions should maintain market expectations by pursuing countercyclical and pro-growth policies. When expectations can be maintained, financial market stability can be maintained more stable so that monetary and fiscal policy instruments can be better transmitted to the economy.
To get the end product, fiscal and monetary institutions must go hand in hand, i.e. blend together, in order to get maximum results. Therefore, the existence of a prudent and credible policy mix must be the basis for overcoming this crisis of trust. Without it, the wave of expectations will continue to defeat the market stability efforts made by monetary and fiscal institutions. Everything will go back to the first paragraph if the policy mix is not always implemented, Indonesia’s monetary stability will continue to be a party that is used as a “backbone” by regulatory uncertainty from the Government.
In the end, credibility is not a commodity that can be bought and given only through populist actions carried out by the government lately. However, credibility is the trust gained through the hard work of monetary and fiscal institutions that are transparent, accountable, and consistent in their actions. Credibility is earned, not gifted.
References
Bank Indonesia. (2026, April 24). Monetary Policy Report Quarter 1 2026. Bank Indonesia. Retrieved May 4, 2026, from https://www.bi.go.id/id/publikasi/laporan/Documents/Laporan-Kebijakan-Moneter-Triwulan-I-2026.pdf
Basri, M. C. (2026). Rupiah, Risk, and Memory 1998. kompas.id. Retrieved 05 4, 2026, from https://www.kompas.id/artikel/rupiah-resiko-dan-ingatan-1998?open_from=Opini_Page
BKF MINISTRY OF FINANCE. (2013). Indonesian Credit Default Swap: Influencing Factors and Comparison with Peers. https://fiskal.kemenkeu.go.id/files/berita-kajian/file/Kajian%20CDS%20indonesia.pdf
Data Historis Obligasi CDS Indonesia 5 Tahun USD. (n.d.). Investing.com. Retrieved May 4, 2026, from https://id.investing.com/rates-bonds/indonesia-cds-5-years-usd-historical-data
Husna, F. (2026). JCI Plunged 7.35% Wednesday due to MSCI’s Freeze. TRADING ECONOMICS. Retrieved May 1 2026, from https://id.tradingeconomics.com/indonesia/stock-market/news/520908
Pratama, R., & Hannany, Z. (2026). Indonesia’s CDS creeps up to the highest in Asia, what message does the market give it? https://www.idnfinancials.com/id/news/61173/cds-indonesia-merayap-naik-tertinggi-di-asia-pasar-beri-pesan-apa
Quotes on Probability • Novel Investor. (n.d.). Novel Investor. Retrieved May 4, 2026, from https://novelinvestor.com/quote-category/probability/
USD/IDR – Dollar to Rupiah Exchange Rate Today. (n.d.). Investing.com. Retrieved May 4, 2026, from https://id.investing.com/currencies/usd-idr
