Government to announce new exchange rate steps<\/p>\n
JAKARTA (JP): The Indonesian government will soon announce new
\nsteps for the foreign exchange rate system to stabilize prices of
\npriority imports and help restore order to the country's economy.<\/p>\n
\"We have to determine a stable exchange rate to enable import-
\ndependent manufacturing companies to make orderly business
\nprograms and to facilitate stable imports of basic necessities,\"
\nPresident Soeharto told members of the Indonesian Ulemas Council
\n(MUI) at the Bina Graha presidential office yesterday.<\/p>\n
President Soeharto said Indonesia had an adequate level of
\nforeign exchange reserves to support imports of raw materials
\nwhich are components for export-oriented companies.<\/p>\n
The rupiah closed at 9,600\/9,800 to the U.S. dollar yesterday,
\nslightly lower than last week's close at 9,400\/9,600.<\/p>\n
Currency dealers said the central bank intervened in the
\ncurrency market to help prop up the rupiah.<\/p>\n
Stock prices in the Jakarta Stock Exchange (JSX) fell 1.1
\npercent yesterday with the main price index falling by 6.17
\npoints to 529.25 points.<\/p>\n
\"We will use them (reserves) to import raw materials, spare
\nparts and other things, such as medical supplies for ordinary
\npeople, overseas studies and paying for haj pilgrimages,\"
\nSoeharto said.<\/p>\n
\"If our industry cannot get raw materials, they will stop
\nproduction,\" he said.<\/p>\n
\"If the industries stop, there will be more unemployment and
\nunemployment will trigger unrest because they will have no
\nincome,\" he said.<\/p>\n
President Soeharto again called on the people not to buy up
\nAmerican dollars as it would hamper the government's latest
\neconomic measures.<\/p>\n
\"People should refrain from buying dollars if they are not
\nengaged in the import of raw materials, components or other goods
\nneeded for domestic manufacturing,\" the President said.<\/p>\n
The central bank, Bank Indonesia, said recently that
\nIndonesia's foreign exchange reserves stood at US$19.06 billion
\nas of the end of last month, enough to cover 4.7 months of
\nimports.<\/p>\n
The President said the government had used some of its foreign
\nreserves to intervene in the currency market to prop up the
\nrupiah against the dollar but such interventions were not
\neffective since the dollars injected into the market were
\nimmediately absorbed by speculators.<\/p>\n
\"Now we will take other steps that can kill them
\n(speculators),\" Soeharto asserted.<\/p>\n
The rupiah has fallen by about 75 percent against the dollar
\nsince last July.<\/p>\n
President Soeharto said wild rumors had also set off violence
\nin several towns due to soaring prices of essential goods.<\/p>\n
Rumored or actual scarcity of essential goods and rising
\nprices have triggered riots in several towns in Java, Sulawesi
\nand the eastern part of the country over recent weeks.<\/p>\n
Bank Indonesia Governor Soedradjad Djiwandono told a House of
\nRepresentatives hearing yesterday that the government was now
\nstudying the possibility of using a currency board system in a
\nbid to stabilize the rupiah against the U.S. dollar.<\/p>\n
\"We are studying it carefully now, so that when it is applied,
\nit should not cause any losses,\" Soedradjad said.<\/p>\n
He said the government was considering all the advantages and
\ndisadvantages of the currency board system before being applied.<\/p>\n
Miranda S. Gultom, a managing director of the central bank,
\nsaid that the government was also studying other alternative
\nexchange rate systems and would soon announce a system to be
\nadopted.<\/p>\n
\"The most important thing is for the new system to be
\nefficient and for it to be able to increase productivity in the
\nreal sector,\" Miranda said.<\/p>\n
Steve Hanke, a U.S. economist, who is one of the leading
\nproponents of the currency board, met President Soeharto,
\neconomic advisor Widjojo Nitisastro and other senior financial
\nadvisors last week and submitted a proposal on the possibility
\nfor the Indonesian government to use the system.<\/p>\n
The currency board system would peg the rupiah to a foreign
\ncurrency at a fixed rate with foreign exchange reserves fully
\nmatching the volume of currency in circulation. (prb\/aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-to-announce-new-exchange-rate-steps-1447893297",
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"sponsor_url": "https:\/\/okusiassociates.com"
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