{
    "success": true,
    "data": {
        "id": 1386731,
        "msgid": "indonesias-peg-mirage-1447893297",
        "date": "1998-02-16 00:00:00",
        "title": "Indonesia's peg mirage",
        "author": null,
        "source": "JP",
        "tags": null,
        "topic": null,
        "summary": "Indonesia's peg mirage If, in his anxiety to find a solution to Indonesia's financial crisis, President Soeharto presses ahead with plans to peg the rupiah to the U.S. dollar, he is likely to find himself exchanging crisis for disaster. The policy looks bound to fail, particularly if it goes into action before stability is restored to the country's economy. Such a strategy would affect the whole region, and could deal a crippling blow to the fragile recovery now under way.",
        "content": "<p>Indonesia's peg mirage<\/p>\n<p>If, in his anxiety to find a solution to Indonesia's financial<br>\ncrisis, President Soeharto presses ahead with plans to peg the<br>\nrupiah to the U.S. dollar, he is likely to find himself<br>\nexchanging crisis for disaster. The policy looks bound to fail,<br>\nparticularly if it goes into action before stability is restored<br>\nto the country's economy. Such a strategy would affect the whole<br>\nregion, and could deal a crippling blow to the fragile recovery<br>\nnow under way.<\/p>\n<p>It would be extremely difficult for Jakarta to prove it is<br>\nfully committed to the responsibilities of a linked exchange rate<br>\nsystem. The government has been slow to start on crucial reforms.<br>\nFaced with a fragile banking system and a high interest regime,<br>\nthe only way out of its problems is by following measures imposed<br>\nby the International Monetary Fund and the World Bank.<\/p>\n<p>Indonesia must pursue policies of tight money and fiscal<br>\nausterity, and stop the central bank printing money to bail out<br>\nother bankrupt banks. Quick fix solutions for political purposes<br>\nwill only make matters worse. Setting the foreign exchange rate<br>\nat 5,000 to the U.S. dollar would put it around 50 percent higher<br>\nthan the current rate. This would lead to a current account<br>\ndeficit, probably accompanied by a wholesale flight of capital.<br>\nThat would spell fresh catastrophe for Indonesia and deep danger<br>\nfor the region.<\/p>\n<p>There is no comparison between present-day Indonesia and the<br>\nconditions which prevailed in Hong Kong when the currency peg was<br>\nintroduced in 1983. Hong Kong had a flexible and transparent<br>\neconomy, and was precommitted to an autonomous currency board.<br>\nToday, as well as huge reserves, it has the backing of China if<br>\nconditions get tough.<\/p>\n<p>Indonesia, on the other hand, faces a fiscal deficit of 5.5<br>\npercent of GDP. Cronyism flourishes. Social unrest and political<br>\nuncertainty are growing. Foreign capital would not flood in to<br>\nhelp sustain a peg. For this very sick economy, the only remedy<br>\nis to take the medicine as prescribed, and to stop thinking that<br>\nIndonesia is in any state to ape Hong Kong on the currency front.<\/p>\n<p>-- South China Morning Post<\/p>",
        "url": "https:\/\/jawawa.id\/newsitem\/indonesias-peg-mirage-1447893297",
        "image": ""
    },
    "sponsor": "Okusi Associates",
    "sponsor_url": "https:\/\/okusiassociates.com"
}