Rupiah depreciation limited to 4%<\/p>\n
JAKARTA (JP): Minister of Finance Mar'ie Muhammad announced
\nyesterday that the depreciation of the rupiah against the U.S.
\ndollar will be limited to between three percent and four percent
\nin the 1995-1996 fiscal year.<\/p>\n
\"As in the past, in 1995-1996 the rupiah is projected to
\ndepreciate by around three percent or four percent,\" he told
\nreporters after attending the plenary session of the House of
\nRepresentatives (DPR) on the 1995-1996 draft state budget.<\/p>\n
The minister said that allowing the rupiah to depreciate to
\nbetween three percent and four percent would not hurt the
\ncompetitiveness of Indonesia's export products.<\/p>\n
The minister made the brief remarks to reporters who asked him
\nif the government would take any further action to stop the
\nspeculative attacks on the rupiah.<\/p>\n
The rush on dollars swept most developing countries, including
\nIndonesia, Malaysia, Thailand and the Philippines, following the
\ndevaluation of the peso in heavily indebted Mexico late last
\nyear.<\/p>\n
Foreign fund managers dumped their rupiah and bought dollars
\non the basis of fear that Indonesia, which also owes a high
\namount of foreign debts, would do the same.<\/p>\n
The spot rate for the rupiah, which dropped to a low of above
\n2,285 against the dollar on Friday, further strengthened
\nyesterday to 2,210, up from 2,215 on Monday.<\/p>\n
Money market dealers said yesterday that the foreign exchange
\ntrading has completely returned to normal following the massive
\nmarket intervention by Bank Indonesia (central bank) last week.<\/p>\n
Market sources said the central bank sold at least US$700
\nmillion to curb the speculative trading.<\/p>\n
Engineered<\/p>\n
Fuad Bawazier, an executive of the Association of Indonesian
\nEconomists, said that the speculative trading might also have
\nbeen engineered by money changers.<\/p>\n
\"Money changers might have intentionally circulated the
\ndevaluation rumor to destabilize the money market and then take
\nthe advantage of the chaos,\" he said.<\/p>\n
Fuad, who is also tax director general, said that the local
\nmoney changers could have colluded with their overseas partners
\nin spreading the devaluation rumor.<\/p>\n
Government officials and economists said that likening the
\nIndonesian economy to that of Mexico is irrelevant and that the
\ndevaluation rumor was completely irrational.<\/p>\n
Overseas and local analysts share the view that the condition
\nof Indonesia's economic fundamentals is much healthier and
\nstronger than those of the financially troubled Mexico.<\/p>\n
Prof. Sumitro Djojohadikusumo, the country's most senior
\neconomist, said here yesterday that Indonesia's foreign debts,
\nwhich totaled around US$93 billion as of last September, remained
\nat a safe level.<\/p>\n
Sumitro, who is often critical of the government's economic
\npolicy, cautioned, however, that Indonesia should be more careful
\nin managing the debts, which are expected to reach the $100
\nbillion level by March next year.<\/p>\n
\"Both the government and the private sector should use their
\nloans for productive activities,\" he said.<\/p>\n
Sumitro warned against using foreign loans for such luxuries
\nas the construction of golf courses. (icn\/hen)<\/p>",
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