Abdurrahman says political factors behind rupiah's fall

Abdurrahman says political factors behind rupiah's fall

JAKARTA (JP): President Abdurrahman Wahid told the
International Monetary Fund (IMF) on Monday that the rupiah's
plunge in value was caused by a perception of political
instability.

"The IMF delegation (expressed) concern over weak market
sentiment which has recently been demonstrated by the fall of the
rupiah's value," presidential spokesman Wimar Witoelar told
journalists.

"The president conveyed his concern that this is due to a
perception which suggested that political and security stability
has not yet been achieved."

Wimar was speaking after a meeting at the presidential palace
between Abdurrahman and visiting IMF Asia-Pacific director Yusuke
Horiguchi.

Wimar said the President told Horiguchi: "Various pressure
(groups) calling for his resignation could also be perceived as
political instability."

Several economists and politicians have in the past week said
Abdurrahman should resign after he and his government failed to
improve the country's economy after one year in office.

Violent rioting and unrest have also continued to plague
several parts of the country.

The rupiah ended lower at Rp 9,400 per U.S. dollar late on
Monday compared to around Rp 9,115 late on Friday. The level is
the lowest since July and is down some 33 percent from the level
early this year.

Dealers said that in addition to politics, the rupiah was also
affected by the weakening of other currencies in the region
particularly the Philippine peso and Thai baht.

But dealers said that dollar selling believed to be made by
state banks has helped prevent a further plunge in the rupiah.

Following a separate meeting with Vice President Megawati
Soekarnoputri on Monday, Horiguchi spelled out the dangers faced
by the government if it failed to lift the market.

"If market sentiment does not strengthen, your investment will
be weakening, the growth will be weakening and the people of your
country will be suffering," he told journalists.

Wimar added the IMF's representative also relayed to
Abdurrahman the body's concern on other issues, including slow
asset sales by the Indonesian Bank Restructuring Agency (IBRA)
and the restructuring of debt owed by large debtors.

"Both sides agree that asset sales must be accelerated and
carried out transparently," he said.

The IMF is providing a multi billion dollar cash bailout to
help finance the country's economic reform program.

The IMF said earlier on Saturday that accelerating the sale of
IBRA assets as well as continuing the other Fund-sponsored
economic programs were crucial to help revive confidence in the
economy.

Separately, finance minister Prijadi Praptosuhardjo told
parliament on Monday that another factor causing the rupiah to
fall was reports that the government was planning to ask
international creditors for a debt moratorium.

"There's a misperception in the market now," Prijadi told
House of Representatives commission IX on state budget and
banking during a meeting.

He said that the government was planning a normal rescheduling
mechanism for its sovereign debt, not a debt moratorium.

"The market in Singapore has panicked because of this term
debt moratorium," he said, pointing out that a debt moratorium
would mean that the government could no longer finance its
development activities.

Prijadi also said that the government had asked Bank Indonesia
to intervene to help strengthen the rupiah when the currency fell
to below the Rp 9,000 level last week.

"But we can't force Bank Indonesia," he said, pointing out
that Bank Indonesia was an independent central bank.

He added that the government had also appealed to domestic
banks to sell their dollars to help lift the local currency.

Meanwhile, Bank Indonesia senior deputy governor Anwar
Nasution said that the central bank would intervene to help
strengthen the rupiah if it was necessary.

Anwar said that central bank could intervene by raising
interest rates or directing the sale of dollars.

The benchmark interest rate of Bank Indonesia one-month SBI
promissory notes is currently hovering at 13.74 percent. The
interest rate is decided via a weekly auction of the SBI notes on
every Wednesday. (byg/rei)