Restore managed exchange rate system: Mar'ie<\/p>\n
JAKARTA (JP): Former minister of finance Mar'ie Muhammad
\ncalled on the government to reintroduce a managed exchange rate
\nsystem to prevent further fall in the value of the battered
\nrupiah yesterday.<\/p>\n
\"The government needs to take decisive action to prevent the
\nsituation from deteriorating further by, for example,
\nreintroducing a managed exchange rate system,\" Mar'ie said in a
\ndiscussion on the economy held by the Indonesian Engineers
\nAssociation and the Indonesian Economic Graduates Association.<\/p>\n
The other alternative, according to the former finance
\nminister, is to control the flows of foreign exchange held by
\nIndonesian exporters.<\/p>\n
Mar'ie was finance minister when the government abandoned a
\nmanaged exchange rate system on Aug. 14 and fully floated the
\nrupiah one month after the monetary crisis first hit the country.<\/p>\n
\"As a matter of fact, even then I preferred a managed exchange
\nrate system to a fully floating system, but we had no choice (but
\nto adopt a floating system) because all our neighboring countries
\nhad taken that step,\" Mar'ie said.<\/p>\n
The rupiah, which traded at around Rp 2,450 against the U.S.
\ndollar at the end of June last year, started to fall in early
\nJuly following devaluations of the Thai baht and the Philippine
\npeso.<\/p>\n
Bank Indonesia widened the rupiah trading band to 12 percent
\nfrom 8 percent to curb currency speculation before abandoning the
\nsystem altogether after the move failed in its objectives.<\/p>\n
\"We lacked the foreign exchange reserves necessary to
\nintervene in the market to defend the value of the rupiah,\" he
\nsaid, adding that the government was spending about US$500
\nmillion every day in its efforts to prop up the currency.<\/p>\n
The rupiah broke through Rp 17,000 barrier in January but then
\nstrengthen to around RP 10,000 against the dollar in the
\nfollowing months before once again falling back toward its all
\ntime low two weeks ago.<\/p>\n
Mar'ie said that reintroducing a managed exchange rate was not
\nimpossible, provided the idea gained the support of the
\nInternational Monetary Fund (IMF).<\/p>\n
If the IMF, which last year arranged a US$43 billion bailout
\nfund to lift Indonesia out of the crisis, permitted the country
\nto use a large part of these funds strengthen Bank Indonesia's
\nforeign reserves, then the idea would be feasible, he argued.<\/p>\n
The government could also strengthen the currency by applying
\ncontrols to the proceeds from exports, he said.<\/p>\n
Under his suggestion exporters would be obliged to carry out
\ntransactions through specially appointed banks so that the
\ngovernment could control the export revenues.<\/p>\n
\"I think such a measure would be fair given that the
\ngovernment also provides foreign exchange assistance to
\nimporters,\" Mar'ie said.<\/p>\n
Bank Indonesia Governor Sjahril Sabirin said earlier yesterday
\nthat the central bank had no plans to reintroduce a managed
\nexchange rate and other forms of capital control to prevent
\nfurther loss of value in the rupiah against the U.S. dollar<\/p>\n
The central bank governor said that the reintroduction of a
\nmanaged floating rate policy and other forms of capital control
\nwould not be effective ways of managing the national currency.<\/p>\n
\"We will maintain an open foreign exchange regime,\" he said,
\nadding that Bank Indonesia was propping up the rupiah by
\nproviding domestic banks with the foreign exchange required to
\ntheir overseas obligations, including trade finance debts. (jsk)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/restore-managed-exchange-rate-system-marie-1447893297",
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