Indonesia’s external-sector risks as FOMC hikes approach

Indonesia's current account deficit has reduced the degree of freedom for policy makers to support growth. Bank Indonesia (BI) has instead had to focus on deficitfinancing through keeping interest rates high, thus slowing import growth and the domestic economy.

The Indonesian rupiah (IDR) to be among the most vulnerable currencies to a sudden US shock, according to Standard Chartered. Indonesia has the highest external debt-to-FX reserves ratio and the highest foreign-currency denominated external debt-to-GDP ratio