Wed, 19 Nov 2008
Bank Indonesia (BI) on Friday reiterated that it has no plan to resort to capital controls following its announcement limiting purchases of foreign currencies without underlying transactions, Dow Jones reported.

"We are still committed to an open capital-account regime," BI Governor Boediono told a press conference.

Boediono said the central bank will continue to be in the market to reduce exchange rate volatility. He, however, said that the central bank "won't operate against the market."

Boediono said that the government will take a $2 billion offshore loan in December that will boost the country's foreign exchange reserves, which stood at $50.6 billion as of end-October.

Dealers said BI has recently reduced its intervention in the foreign exchange market after spending nearly $7 billion last month to support the rupiah, which has fallen 20% against the dollar since the beginning of the year.

Analysts said the move may be aimed at preventing local investors from shifting their rupiah holdings into foreign currencies.

Enrico Tanuwidjaja, a strategist at OCBC Bank, said the new rule was meant to stem speculation and agreed that it was not a form of capital control.

For Indonesian individuals or entities, the new ruling affects all types of transactions such as spot, forward and derivatives, BI said. For foreigners, the new ruling only applies to purchases of foreign currencies on the spot market.

In the case of local individuals or entities, they must submit a domestic taxpayer registration number (NPWP) to commercial banks when conducting the foreign exchange transactions.



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