Govt sees no concern as rupiah slumps over 10,000<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The rupiah continued its fall against the U.S. dollar for the
\nseventh consecutive trading day on Monday, beginning the week at
\na new low level of Rp 10,000 as high oil prices kept fueling
\nlocal corporate demand for imports.<\/p>\n
Despite the situation, the government still downplayed the
\npossible negative impact on Indonesia's economy, convinced that
\nit was nothing extraordinary and that it would eventually subside
\non the country's improving investments and exports.<\/p>\n
The rupiah closed at Rp 10,030 on Monday, down from its
\nclosing of Rp 9,985 on Friday. Friday's intraday trading
\nwitnessed the currency brushing past the Rp 10,000 mark.<\/p>\n
Monday's closing continued to be the rupiah's worst
\nperformance since March 2002, during which the currency had
\ntraded at Rp 10,080 a dollar, according to data from Bank
\nIndonesia (BI).<\/p>\n
Coordinating Minister for the Economy Aburizal Bakrie said the
\nrupiah's latest level against the greenback was not of particular
\nconcern, saying that although it would affect the government's
\npayment of foreign debts, it should also give exporters a
\ncompetitive advantage.<\/p>\n
\"Rp 10,000 is not a sacred number. Why shouldn't it be Rp
\n9,000, or Rp 11,000, or 15,000?\" he said after a Cabinet meeting
\nwith the central bank to assess the situation.<\/p>\n
\"We do not have to put a line of defense for the rupiah at Rp
\n10,000, as its rate will continue going up and down according to
\nour free floating exchange rate policy. But we are sure that in
\nthe long run, a rate of Rp 9,400 by next year can still be
\nachieved.\"<\/p>\n
Aburizal explained the difference between the current
\nsituation and the 1997 financial crisis, when the rupiah weakened
\namid Indonesia experiencing both a negative current account and a
\ncapital flight.<\/p>\n
BI governor Burhanuddin Abdullah said Indonesia's current
\naccount during this year's second quarter had reached a deficit
\nfaster than the central bank's expectations, as the country's
\nimports had already risen by 30 percent, while exports only rose
\nby 14 percent.<\/p>\n
He said BI was forecasting the country's current account to
\nreach a $2.7 billion surplus by the end of the year.<\/p>\n
Burhanuddin agreed with Aburizal's projection, saying the
\nrupiah would strengthen next year and Rp 9,400 was not
\nimplausible considering the country's improving economic
\nfundamentals.<\/p>\n
\"What is important for BI is how businesses can plan their
\nactivities. Prices are that way, going up and down, it is we who
\nhave to anticipate these changes,\" he said, adding that the
\ncentral bank would continue to intervene in the market.<\/p>\n
\"Later this month, BI will also sign a bilateral swap
\narrangement with Japan worth $6 billion, followed with China and
\nSouth Korea, of $2 billion each.\"<\/p>\n
Minister of Finance Jusuf Anwar -- who was previously
\nconcerned that the country's forex reserve would be exhausted due
\nto oil imports -- said the state budget was also still at a Rp 22
\ntrillion surplus as of Aug. 15.<\/p>\n
\"The market should not panic because the state still has
\nenough money for a long time to come,\" he said.<\/p>\n
The Indonesian Chamber of Commerce and Industry (Kadin)
\nchairman Mohamad S. Hidayat said the private sector hoped this
\nwould be only a temporary occurrence.<\/p>\n
\"Kadin asks the government to state publicly at what rate it
\nwants the local currency be against the U.S. greenback and for
\nhow long,\" he said, adding that such a move would discourage
\nfinancial market speculators from playing with the rupiah.<\/p>\n
National Economy Recovery Committee (KPEN) chairman Sofjan
\nWanandi said the declining exchange rate was a result of the
\ngovernment's reluctance to remove the fuel subsidy.<\/p>\n
\"(Such reluctance) has eventually contributed to the declining
\nconfidence over the country's capability to manage its economy,\"
\nhe said.<\/p>\n
The only way to restore confidence was to have the courage to
\nincrease domestic fuel prices gradually, he said, or else the
\nforeign reserves would continue to be drained.<\/p>",
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