USD/IDR: Indonesia's ban on palm oil exports will put downward pressure on the rupiah — Natixis

The Russian-Ukraine war has already created negative waves in the global economy, and now an unexpected Indonesian move to ban palm oil exports will have adverse

April 29, 2022 - 04:52 PM 289 views

USD/IDR: Indonesia's ban on palm oil exports will put downward pressure on the rupiah Natixis

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© USD/IDR: Indonesia's ban on palm oil exports will put downward pressure on the rupiah Natixis

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The Russian-Ukraine war has already created negative waves in the global economy, and now an unexpected Indonesian move to ban palm oil exports will have adverse impacts on the global food market in the future. Natixis Report's economists stated.

The Indonesian ban will hopefully increase food prices.

A ban on palm oil exports was announced by the Indonesian president, Joko Widodo. This ban covers both palm oil and crude oil exports. The Indonesian government imposed the oil embargo to reduce rising food prices and to quell local unrest.

However, the ramifications may toss the country's economy into disarray, pushing global prices even higher.

The effects of increasing palm oil prices will be felt all around the world. Food inflation is on the decline, which means lower purchasing power for everyone.

It’s good for Indonesia because the oil export ban can reduce the domestic cost of cooking oil. However, because palm oil exports are a critical source of revenue for the Indonesian government, this could keep the Indonesian currency (IDR) under pressure. In the meantime, imports are becoming more expensive as the sinking IDR adds to cost pressure by allowing weaker foreign exchange to pass through. As a result, while its ban on the export of palm oil is well-intentioned, it may backfire.

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