Govt allays fear of devaluation<\/p>\n
JAKARTA (JP): Fears over the devaluation of the rupiah are
\nunfounded and Minister of Finance Mar'ie Muhammad says the
\nIndonesian economy is in solid condition.<\/p>\n
\"The Indonesian economy bears no resemblance at all to that of
\nMexico. Worries over the possible devaluation of the rupiah are,
\ntherefore, an overreaction,\" he told newsmen in response to
\nmounting anxieties over a possible devaluation of the rupiah.<\/p>\n
Mexico devalued its currency on Dec. 20 by 15 percent, which
\nsparked chaos in its economy. The peso has lost nearly 70 percent
\nof its pre-devaluation level against the greenback, affecting the
\nworld's financial markets.<\/p>\n
Mar'ie said yesterday that Mexico's economic crisis was not
\nonly caused by a huge debt problem but also by their high current
\naccount deficit.<\/p>\n
Fears of a Mexican-style capital outflow continued in Asia's
\nemerging markets, including in Indonesia, the Philippines and
\nThailand.<\/p>\n
The rupiah remained volatile yesterday as foreign fund
\nmanagers dumped the currency and bought U.S. dollars and other
\nforeign units, fearing that Indonesia, which is also heavily
\nindebted, could do the same.<\/p>\n
\"The rupiah is still under heavy selling pressure as the
\ndemand for the American dollar remains strong,\" said a foreign
\nexchange dealer at a joint venture bank said.<\/p>\n
The value of the rupiah against the U.S. dollar, which dropped
\nto its lowest level of 2,285 on the spot market Thursday,
\nslightly strengthened to 2,230 yesterday morning. It further
\ninched up to 2,219 later in the afternoon following Bank
\nIndonesia's intervention to stabilize the market.<\/p>\n
The minister said that Indonesia's foreign reserves are still
\nat a safe level despite the country's high amount of foreign
\nloans, estimated to reach US$100 billion next year.<\/p>\n
Healthy<\/p>\n
Economic analysts also described the reaction to the Mexican
\ndevaluation measure as unfounded.<\/p>\n
James W. Castle, the president of Business Advisory Indonesia,
\nsaid that there was no chance of rupiah devaluation under the
\ncurrent economic condition.<\/p>\n
\"The Indonesian economy is very solid and I am quite confident
\nthat the government will not take a devaluation measure,\" he
\nsaid, while saying that Indonesia's economic fundamentals, such
\nas foreign reserves and current account deficit, are relatively
\nmore healthy than those of Mexico.<\/p>\n
Castle said that the upward trends in Indonesia's exports
\nwould continue in the wake of economic recovery in the major
\nmarkets.<\/p>\n
\"The rise in non-exports will make the country's balance of
\npayments even sounder,\" he said.<\/p>\n
Mohammad Sadli, a senior economic analyst, said that likening
\nthe Indonesian economy to Mexico's is illogical but that the fast
\nmovement of funds from one country to another is part of economic
\nglobalization.<\/p>\n
\"Jittery fund managers are not well informed about the sound
\ncondition of the Indonesian economy and that's why they are very
\ncautious,\" he said.<\/p>\n
Another analyst said, however, that the overreaction of fund
\nmanagers to Mexico's capital outflow are understandable, given
\nthe nature of their business.<\/p>\n
He said that fears of a fresh devaluation measure emerged as
\nmany people were traumatized by the impact of the past
\ndevaluation.<\/p>\n
The government devalued the rupiah substantially in September
\n1986 in the wake of the sharp drop in oil prices. However, since
\n1986, the government has adopted a slow depreciation policy in
\nmaintaining the competitiveness of the rupiah by adjusting its
\nvalue against foreign currencies on a day-to-day basis.<\/p>\n
In this 1994-95 fiscal year, which will end in March, the
\ndepreciation of the rupiah against the dollar is limited to
\naround four percent.<\/p>\n
\"By using the slow depreciation policy, a devaluation like in
\nthe past is no longer needed,\" said Sadli, who is a former
\ncabinet minister.<\/p>\n
The economists said that the future of Indonesia's economy
\nlies in the ability of the Indonesian government to stimulate
\nexports to curb a possible increase in the country's current
\naccount deficit.<\/p>\n
Hamzah Haz, a member of the House of Representatives (DPR),
\nsaid that the sharp growth in imported capital goods, expected to
\nresult from the increase in new investment approvals last year,
\ncould considerably hurt the country's balance of payments if no
\nappropriate measures are taken to increase non-oil exports.<\/p>\n
The current account deficit is estimated to grow to US$4.09
\nbillion in 1995-96 from the estimated $3.56 billion this fiscal
\nyear and $2.94 billion in 1993-94. (rid\/hdj\/hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-allays-fear-of-devaluation-1447893297",
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