Govt undecided on CBS implementation: Mar'ie<\/p>\n
JAKARTA (JP): The timing on when Indonesia would implement its
\nplans to peg the battered rupiah to a single foreign currency
\nthrough a currency board system (CBS) depended on President
\nSoeharto, Minister of Finance Mar'ie Muhammad said yesterday.<\/p>\n
"Let's just wait for his decision... Honestly, I don't know
\nwhen," Mar'ie said in reply to questions from the House of
\nRepresentatives regarding the timetable for the CBS plan.<\/p>\n
He added that the President had only instructed his ministry
\nand Bank Indonesia, the central bank, to make preparations for
\nCBS operations so that it would be a credible system when
\ninstalled.<\/p>\n
"Up to this moment, we have not received any other
\ninstructions," he said.<\/p>\n
Mar'ie stressed, however, that during the preparation period
\nthe President would thoroughly consider all developments and
\nopinions concerning the currency board plan.<\/p>\n
Indonesia will always maintain its good relationships with
\nvarious international institutions including the International
\nMonetary Fund (IMF), he added.<\/p>\n
He pointed out that the government was in contact with senior
\nIMF advisor P.R. Naverkar, the IMF liaison officer in Indonesia,
\nover the implementation of IMF-sponsored reform programs agreed
\nupon in January as a condition to US$43 billion in bailout funds.<\/p>\n
"The preparations (for the currency board plan) include
\nconsultations with the international institutions, including the
\nIMF," he said.<\/p>\n
A CBS is a monetary regime based on an explicit legislative
\ncommitment to exchange domestic currency for a specified foreign
\ncurrency at a fixed exchange rate.<\/p>\n
The government is trying to stabilize the rupiah following a
\n70 percent drop in its value against the dollar from 2,450 in
\nJuly to about 9,000 at present.<\/p>\n
The CBS plan has raised concerns that Indonesia may not be
\ncommitted to the IMF reform programs. The IMF has threatened to
\ncut off its rescue funds to the country if it proceeds with the
\nplan.<\/p>\n
Major donor countries to Indonesia in the Group of Seven
\nindustrialized countries also reaffirmed their opposition over
\nthe weekend to an introduction of the CBS at this point in time.<\/p>\n
Despite the merits of the CBS, Mar'ie said, Indonesia must
\nfirst meet several conditions before implementing the fixed peg
\nplan.<\/p>\n
He explained that under a currency board, Bank Indonesia would
\nno longer be able to guarantee commercial banks.<\/p>\n
The guarantee on rupiah and foreign exchange claims on
\ndomestic banks was enacted last month in a move to boost public
\nconfidence in the sector.<\/p>\n
"We are trying to find other alternatives to replace the
\nguarantee scheme," Mar'ie said.<\/p>\n
The minister said the settlement of the country's corporate
\nforeign debts, estimated at $74 billion, would be another
\nprerequisite before a currency board could be established.<\/p>\n
He expressed concern that if corporate debts could not be
\nsettled through rollovers or rescheduling, there might be massive
\nmarket competition for dollars immediately after a currency board
\nwas installed.<\/p>\n
He added: "The success of the CBS also depends on domestic and
\ninternational support."<\/p>\n
Mar'ie stressed that although a currency board would not allow
\nthe central bank to make bridging financing commitments, all
\ncommitments made before the implementation of a CBS should be
\nhonored, including the decision to reimburse all depositors of
\nthe 16 banks closed by the government in November. (08)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-undecided-on-cbs-implementation-marie-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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