Rupiah is likely to remain stable in next two months<\/p>\n
JAKARTA (JP): The rupiah will remain stable in the next two
\nmonths despite the flat growth of Indonesia's non-oil exports and
\nstronger inflationary pressure, a foreign bank executive
\npredicted yesterday.<\/p>\n
Johannes Sjarif, the treasury relationship manager of the
\nNetherlands-based ABN-AMRO Bank, estimated that the rupiah's
\ndepreciation against the U.S. dollar will reach less than five
\npercent for the whole 1994.<\/p>\n
The estimated five percent is higher than last year's figure
\nof 3 percent, but Johannes said that his estimate is much lower
\nthan the six to seven percent projected by economists early this
\nyear.<\/p>\n
The dollar has thus far already gained 3.5 percent since
\nJanuary this year to Rp 2,183 from Rp 2,110 as of last December.<\/p>\n
Johannes attributed the lower-than-estimated depreciation to
\nthe healthy performance of the country's foreign exchange
\nreserves.<\/p>\n
"The inflows of foreign currencies will continue growing in
\nline with the rise in foreign investment both in the industrial
\nsector and in the capital market," he told a seminar on trade
\nfinancing held by his bank.<\/p>\n
Speakers at the seminar, which discussed the 1993 revision of
\nuniform customs, practice for documentary credits, the use of
\nletters of credit (L\/C) in local trade and foreign exchange
\ndealings in Indonesia, included Walter Tan, the senior vice
\npresident of ABN-AMRO Bank's branch in Singapore and Henk Mulder,
\nthe vice president of the bank's Indonesian branch.<\/p>\n
Investment<\/p>\n
He said that the relaxation of the government's investment
\npolicy would attract more foreign investors and that logically it
\nwill, in return, boost the country's foreign exchange reserves.<\/p>\n
According to Bank Indonesia (the central bank), the country's
\nofficial reserves as of August reached a manageable level of
\nUS$12.35 billion, equivalent to the value of 4.85 months of non-
\noil imports.<\/p>\n
The rise in crude oil prices to between $18 and $19 per
\nbarrel, as compared to the government's targeted price of $16 per
\nbarrel, has significantly improved the balance of payments
\nprojection so that the lower than estimated growth in non-oil
\nexports will not really deal a blow to the country's foreign
\nexchange reserves.<\/p>\n
The country's non-oil exports dropped for the first time in
\nthe first quarter of this year to US$1.61 billion, or 1.6 percent
\nlower than those in the corresponding period of last year, due
\nmainly to the drop in exports of textile-related products.<\/p>\n
Non-oil exports recovered in June, rising by around 15 percent
\nto $2.7 billion from the same period of last year.<\/p>\n
Johannes acknowledged that the inflation rate, which has
\nreached 7.38 percent in the first nine months of this year, may
\nfurther increase.<\/p>\n
Economists estimate the inflation rate will surpass the
\ngovernment's maximum limit of 10 percent due to the higher than
\nexpected increase in prices of food and construction materials
\nand the government's decision to raise electricity tariffs
\nbeginning next month.<\/p>\n
Johannes estimated that the stronger inflationary pressure
\nwill prompt commercial banks to raise their time-deposit rates to
\nbetween 14.5 and 15 percent per annum from between 12 and 13.5
\npercent at present.<\/p>\n
"The higher interest rates will enable them to curb capital
\nflights as depositing rupiah in time deposits will still give
\ngood returns," he said.<\/p>\n
Johannes said that Bank Indonesia's recent move to widen the
\nspread (band) of the sale and buy rates of the rupiah against the
\ngreenback to Rp 30 from Rp 20 will also discourage capital flight
\nas the band will give more risk to short-term speculators.(hen)<\/p>",
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