BI urged to slash interest rates<\/p>\n
JAKARTA (JP): An improvement in public confidence of the
\nrupiah in the past several days has created better momentum for
\nBank Indonesia (the central bank) to ease its tight monetary
\npolicy, businessmen and analysts have said.<\/p>\n
Sofjan Wanandi, chairman of the Gemala Group, said yesterday
\nthat improved public confidence made rate cuts much more
\nfeasible.<\/p>\n
\"I think now is the right time for Bank Indonesia to cut its
\nrates,\" he told The Jakarta Post. \"Unlike in the past, a cut in
\ninterest rates is less risky.\"<\/p>\n
The rupiah has been improving in the last few days on the
\ngovernment's announcement last week that it would seek financial
\naid from the International Monetary Fund (IMF).<\/p>\n
A team led by IMF officials was in Jakarta to discuss the aid,
\nbut Minister\/State Secretary Moerdiono said yesterday that
\ngovernment officials and the team had not talked about the amount
\nof aid needed.<\/p>\n
The rupiah was steady against the dollar yesterday in slow
\ntrading, closing at 3,470\/3,500, compared to an opening of
\n3,450\/3,500.<\/p>\n
Sofjan said that keeping interest rates at current levels
\nwould devastate the already weak business sector. He estimated
\nthat many companies would collapse if the central bank maintained
\nits credit crunch policy.<\/p>\n
He said that the government's tight monetary policy had
\nseverely hit almost every business, not only due to expensive
\nloans but also because of a sharp decline in orders and sales.<\/p>\n
\"Contractors have lost at least 30 percent of their orders,
\nthe automotive industry has been cutting shifts, food companies
\nhave had the same experience suffering a 30 percent decline in
\nsales, while supermarkets and tourism have lost about 30 percent
\nof their revenue,\" he said.<\/p>\n
He feared that if the government maintained its monetary
\npolicy, the impact would not only cause economic difficulties,
\nbut also social problems.<\/p>\n
Bank Indonesia raised its benchmark interest rates to as high
\nas 30 percent on Aug. 19 as part of measures to shore up the
\nfalling rupiah.<\/p>\n
In late September, the central bank for the fourth time
\nlowered its interest rates on one to three-month SBI papers to a
\nrange of 17 percent to 21 percent, from 18 percent to 23 percent.<\/p>\n
But Sofjan said the interest rates were still too high. \"If
\nthe SBI rates are maintained at a level of between 17 percent and
\n21 percent, the deposit rates would stay high at 30 percent and
\nthe lending rates would continue to hover between 30 percent and
\n40 percent.\"<\/p>\n
No companies would be able to survive with such high rates, he
\nsaid.<\/p>\n
Laksamana Sukardi of Reform Consulting Group shared the same
\nview saying the prolonged tight monetary policy could backfire on
\nthe country's economy.<\/p>\n
\"It's the right momentum now to loosen the tight monetary
\npolicy because the rupiah has already reached an appropriate
\nlevel,\" he said.<\/p>\n
Laksamana said the monetary measures could cause an economic
\nrecession.<\/p>\n
Chief economist of Danareksa Sekuritas, Rino Agung Effendi,
\nacknowledged that high interest rates were crippling business
\nactivities, but said that a move to cut rates could further spur
\ncurrency speculation.<\/p>\n
\"The loosening of the tight monetary policy should be
\nsimultaneously introduced with the announcement of the IMF
\nfinancial package,\" he told the Post.<\/p>\n
Rino argued that if the government ended the tight monetary
\npolicy by lowering interest rates, the rupiah would again become
\na target for speculators rushing for dollars. (aly\/hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bi-urged-to-slash-interest-rates-1447893297",
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