Rupiah's fall 'no longer economic fundamentals sign'<\/p>\n
JAKARTA (JP): The sharp drop in the rupiah against the U.S.
\ndollar in the last three months did not reflect the country's
\neconomic fundamentals any more, according to an economist.<\/p>\n
Sri Mulyani Indrawati, an economist at the University of
\nIndonesia, said here yesterday that the rupiah's free fall was no
\nlonger controllable as almost all segments of society rushed to
\nbuy dollars to save their assets.<\/p>\n
The push for dollars was not only made by big companies to
\nrepay their debts or imports but also by those who felt they had
\nmoney to protect, she said.<\/p>\n
\"Even my friends who have deposits of up to Rp 20 million buy
\ndollars as protection. It's quite unrational. Some people even
\ncheer the rupiah's free fall,\" she told The Jakarta Post.<\/p>\n
She said the psychological impact of the frenzy to buy dollars
\nwas so strong that the monetary authority could no longer
\ninfluence the market sentiment.<\/p>\n
The government had categorically run out of \"instruments\" to
\nrestore public confidence, she said, citing that the recent
\nannouncements of economic reforms to improve the ailing economy
\ndid not receive a positive reaction.<\/p>\n
\"The monetary authority has run out of ammunition to improve
\nthe market sentiment,\" she said. \"It now depends on how the
\ngovernment manages its microeconomics,\" Sri added.<\/p>\n
The monetary crisis has hit several Southeast Asian countries
\nsince July following the devaluation of the Thai baht. The rupiah
\nhas continued to lose ground since then. Its value against the
\nU.S. dollar has now dropped by over 80 percent.<\/p>\n
Sri said the fall of the rupiah between July and August was
\npurely \"economic\" as most foreign investors' withdrawals were
\nbased on economic reasons.<\/p>\n
\"But after that, the rush for dollars continued as people only
\nsaw the downward trend of the rupiah,\" she said.<\/p>\n
The rupiah recovered slightly yesterday closing at 5,450\/5,650
\nin the spot market after touching down to a historic low of 5,980
\nagainst the dollar on Tuesday. The rupiah was Rp 2,400 against
\nthe American greenback in early July.<\/p>\n
The Jakarta Stock Exchange's composite index also improved
\nyesterday, closing at 368.68 points, almost half its highest
\nlevel of 740.93 points on July 7 this year.<\/p>\n
The Indonesian government asked the International Monetary
\nFund (IMF), the World Bank and the Asian Development Bank for
\nhelp and received a US$23 billion bailout package in mid-October
\nthis year. Other bilateral agreements were also made available to
\nsupplement the financial package.<\/p>\n
The government has taken several financial reform measures,
\nincluding the closure of 16 banks since early November this year.<\/p>\n
Other analysts said the main reason behind the rupiah's free
\nfall was due to the sharp demand from local companies for dollars
\nto repay their offshore loans.<\/p>\n
The country's foreign debt stood at $117 billion as of
\nSeptember this year, up 7.3 percent from $109.3 billion recorded
\nin March this year with the private sector accounting for $65
\nbillion and the remaining $52.3 billion by the government.<\/p>\n
Most of the private loans were unhedged.<\/p>\n
\"I haven't seen any constructive action taken by the
\ngovernment to solve the problems since August,\" Sri said.<\/p>\n
She acknowledged that the government had issued several
\nmonetary and fiscal measures to calm the market, but they were
\nuseless.<\/p>\n
\"Most of the measures were one-sided. They were not aimed at
\naddressing the market but to defend the government's policy,\" she
\nsaid of the reason why every move announced by the government
\nfailed to have a positive impact on the battered financial
\nmarkets. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiahs-fall-no-longer-economic-fundamentals-sign-1447893297",
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