Rupiah seen to remain attractive<\/p>\n
JAKARTA (JP): Bank Indonesia's Governor J. Soedradjad
\nDjiwandono said yesterday the government would continue to
\ndepreciate the rupiah against the U.S. dollar to a level which
\ncould boost Indonesia's export performance.<\/p>\n
But the depreciation would also be at a level which
\naccommodated the public's understanding that a strong rupiah was
\nneeded, he said.<\/p>\n
\"For the national interest, a balance between the two will
\nalways be needed,\" he said after speaking at a conference held by
\nABN-Amro bank on the European single currency.<\/p>\n
Soedradjad said that despite the public's understanding, the
\nbest indicator of a currency's strength was the inflation rate.<\/p>\n
\"If inflation is high, it means the rupiah's purchasing power
\nis weak,\" he said. So it was most important to keep inflation
\nlow, he said.<\/p>\n
\"If inflation is controlled -- meaning that prices are stable
\n-- then the rupiah will be favorable to the public,\" he said.<\/p>\n
The rupiah's value was closely linked to the dollar, he said.<\/p>\n
\"But if the equilibrium between the rupiah and dollar is
\nsometimes disrupted, it doesn't mean everyone should be sad,\" he
\nsaid.<\/p>\n
\"You spend in rupiah and you are paid in rupiah. So the
\nindicator is really price levels,\" he said.<\/p>\n
Soedradjad said that Bank Indonesia, the central bank, would
\ncontinue to support export activities. For this reason, it would
\ncontinue to depreciate the rupiah by 3 percent to 5 percent each
\nyear, he said.<\/p>\n
But he said the bank would also manage the rupiah in a manner
\nwhich reflected the market.<\/p>\n
He said the funds which entered and left a country were not
\nalways related to its export and import activities.<\/p>\n
For Indonesia, funds entered because the country's economic
\nfundamentals were considered sound and interest rates were
\nattractive, he said.<\/p>\n
\"If lot of money comes in, then money supply goes up -- maybe
\neven exceeding demand. This makes depreciation a difficult task,\"
\nhe said.<\/p>\n
For the sake of national interest, the rupiah would have to be
\nmanaged in such a way that exporters could continue to use the
\nincoming funds to conduct their activities, while the public
\ncontinued to feel \"safe\" with a strong rupiah, he said.<\/p>\n
In fiscal 1996\/97 (ended in March) when inflation in the
\ncountry was 5.17 percent, the rupiah depreciated by 3.35 percent
\nagainst the American dollar but appreciated by 12.60 percent
\nagainst the Japanese yen and by 10.02 percent against the German
\nmark.<\/p>\n
Europe<\/p>\n
Soedradjad told the conference the new currency would mean
\nmore opportunities for Indonesia.<\/p>\n
\"The Euro market meets many of the criteria used by Indonesia
\nin its traditional approach to financial and capital markets:
\npragmatism and prudence; borrowing when markets are favorable and
\nconditions attractive; and tapping the market when it offers
\nsomething of specific interest such as benchmarking or a true
\ndiversification of sources of funds,\" he said.<\/p>\n
And if Indonesia borrowed in the new market, it could opt to
\nkeep some Euros to diversify its currency reserves and match its
\nliabilities, he said.<\/p>\n
\"Alternatively, it could swap the Euros into dollars,\" he
\nsaid.<\/p>\n
He said that on the investment side, the Euro market could be
\nattractive to Indonesia as it offered a series of diversified
\nborrowers that had so far not tapped anything but a limited pool
\nof the largest investors.<\/p>\n
\"The development of a single market with a single currency
\nshould lead us to consider the currency denomination of our
\nexports to the European market,\" he said, adding that the Euro
\nmight become one of the main reserve currencies.<\/p>\n
He said the Indonesian banking industry could be among the
\nfirst Indonesian users of the Euro market. \"The ability to access
\na new market with new products and new participants, on both the
\nasset and liability side of the industry, will be of considerable
\nbenefit to our banking sector,\" he said.<\/p>\n
Soedradjad said Indonesian imports and exports could also be
\ndenominated in the Euro, which is due to be established on Jan.
\n1, 1999.<\/p>\n
He said it was important to know what would happen to
\nIndonesia's existing debts denominated in currencies that would
\nbe converted into the Euros, as well as the interest rate applied
\nand the legislation determining that these issues would be
\nformulated. (pwn)<\/p>\n
Photo -- Page 11<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/rupiah-seen-to-remain-attractive-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }