Inflation has Indonesians converting to dollars<\/p>\n
JAKARTA (JP): High inflation in the first three months of this
\nyear has encouraged people to deposit their money in U.S. dollars
\nrather than rupiah to avoid losses from the Indonesian currency
\ndepreciation, according to bank executives.<\/p>\n
The inflation rate has increased from 1.25 percent in January
\nto 1.76 percent in February before falling back to 0.7 percent in
\nMarch. This puts inflation in the first quarter of this year at
\n3.71 percent, making the government's estimate of a year end rate
\nof five percent unrealistic.<\/p>\n
\"Deposits in the dollar have continued to grow in the last two
\nmonths,\" an executive of Bank Bali said.<\/p>\n
Executives of other major commercial banks have a similar view
\nof the trend depositors.<\/p>\n
However, increases in the value of the time deposits in
\nAmerican currency in foreign banks was not as significant
\ncompared to those in local banks.<\/p>\n
\"Our interest rate (on dollar deposits) is lower than domestic
\nbanks and I think this is the reason why people prefer to deposit
\ntheir dollars in local banks,\" an executive of Standard Chartered
\nBank.<\/p>\n
Depreciation<\/p>\n
Kiki Handijaya, a director of Modern Bank, said the
\ngovernment's proposal to depreciate the rupiah against the dollar
\nat around six percent has fueled the demand for dollar.<\/p>\n
\"There is a rush to buy dollars as the people convert their
\ntime deposits to U.S. currency,\" he said.<\/p>\n
He said if the depreciation of the rupiah against the dollar
\nrises to six percent this year from 2.33 percent in 1993 and the
\ninflation reaches above nine percent, the people will get no
\nprofit from interest bearing rupiah accounts.<\/p>\n
The interest rates of the time deposits in rupiah offered by
\nmajor banks are between eight and nine percent per annum or
\nalmost the same level of the 1993 inflation rate, which reached
\n9.77 percent.<\/p>\n
Bank analysts said that the people will get nothing but losses
\nfrom their rupiah deposits if the inflation rate reaches as high
\nas that in 1993.<\/p>\n
\"If the interest rate is nine percent and the inflation is
\nalso nine percent, you will suffer a loss because you have to pay
\na 15-percent tax on interest earnings,\" an analyst said.<\/p>\n
He said that the low interest rates have also encouraged
\npeople to invest their money in dollars, which are expected to
\nrecord a faster appreciation against the rupiah this year.<\/p>\n
By depositing money in U.S dollars, depositors could also
\nprofit from the currency's appreciation against the rupiah, which
\nmay reach between four and five percent per annum, in addition to
\nthe rate of interest.<\/p>\n
\"Above all, depositing money in U.S. dollars will make people
\nfeel more confident and free from fears about rupiah
\ndevaluation,\" he said.(hen)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/inflation-has-indonesians-converting-to-dollars-1447893297",
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