'Political infighting' behind rupiah's fall<\/p>\n
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin blamed
\nyesterday politicians' maneuvering for causing the rupiah's
\ncontinuing plunge against the U.S. dollar.<\/p>\n
He called on politicians to refrain from acting or commenting
\nin ways which would only create a jittery environment and prevent
\nthe government from working to salvage the damaged economy
\nwithout any political disruptions.<\/p>\n
\"The rupiah is now largely influenced by political factors,\"
\nSjahril told journalists at the unveiling of Bank Indonesia's
\n(BI) 1997\/1998 annual report.<\/p>\n
\"We call on politicians to give the economic team a chance to
\nhandle the economy so it can recover without political
\ndisturbances and demonstrations.<\/p>\n
\"This appeal comes from the bottom of my heart,\" Sjahril said,
\nadding that political disturbances, including public
\ndemonstrations, would only further weaken the rupiah.<\/p>\n
Sjahril said he was confident the country's political leaders
\ncould comprehend his plea because they were also concerned with
\npeople's hardships.<\/p>\n
\"Our economy is already fragile. Without any political
\nstability, it would be very difficult to stabilize the exchange
\nrate, which is key to the economic recovery.\"<\/p>\n
He said the appeal was not superfluous because although BI is
\nnot involved in politics, \"It's the central bank which has to
\nclean up the dishes\" of the negative impact of political
\ninfighting.<\/p>\n
The continuing plunge in the rupiah's exchange rate has left
\nthe country's economy in its worst economic crisis in three
\ndecades. The government is forecasting inflation will soar to
\nabout 80 percent, with the economy contracting by 10 percent this
\nyear.<\/p>\n
The rupiah sank to its lowest level of Rp 17,000 to the dollar
\nin January, from Rp 2,450 in July before the crisis. The currency
\nmanaged to stabilize at around Rp 7,000 in early May after the
\ngovernment struck a renewed deal with the International Monetary
\nFund in April and the central bank raised its key interest rates.<\/p>\n
Strong pressure on the rupiah returned following the May 14
\nrioting in Jakarta and several major cities which led to
\nSoeharto's resignation as president on May 21.<\/p>\n
Since then the rupiah has continued to weaken, surpassing Rp
\n15,000 recently and was trading at around 14,700 yesterday amid
\ncontinuing organized public demonstrations to undermine the
\nleadership of the new president, B.J. Habibie.<\/p>\n
Rumor has it that Soeharto is preparing for a comeback into
\nthe political arena.<\/p>\n
Interest rates<\/p>\n
Sjahril reiterated that the central bank would continue to
\nmaintain a high interest-rate policy to stabilize the rupiah and
\ncurb inflation.<\/p>\n
\"We're confident that the high interest rate policy is the
\nright step,\" he said, adding that lowering the rates would only
\nfurther weaken the rupiah.<\/p>\n
\"If the exchange rate doesn't strengthen, it will be very
\ndifficult for BI to lower interest rates,\" Sjahril said.<\/p>\n
The central bank's one-month SBI short-term promissory note
\nbenchmark rate now stands at 58 percent per annum.<\/p>\n
There has been mounting pressure for BI to lower the rates in
\norder to restore the ailing banking sector and revive business
\nactivities.<\/p>\n
Sjahril also said that although he believed the current free-
\nfloating exchange rate system could succeed in strengthening the
\nrupiah, BI would be open to other alternatives, including
\nreintroducing the managed float system, as suggested by former
\nfinance minister Mar'ie Muhammad.<\/p>\n
\"We'll not be so stubborn in keeping this system (free-float)
\nwithout studying other alternatives,\" he said.<\/p>\n
Mar'ie and Sjahril's predecessor J. Soedradjad Djiwandono
\nopted to abandon the managed float system on August 14 after
\nattempts to widen the rupiah trading band up to 12 percent failed
\nto defend the currency and only resulted in the depletion of BI's
\nforeign exchange reserves.<\/p>\n
Mar'ie said Tuesday that the reintroduction of the managed
\nfloat system could work only if the IMF provided its support,
\nincluding permitting the country to use a large part of the US$43
\nbillion bailout arranged by the IMF to rescue the economy. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/political-infighting-behind-rupiahs-fall-1447893297",
"image": ""
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