Banks told to help boost ailing rupiah
JAKARTA (JP): President Abdurrahman Wahid has instructed finance minister Bambang Sudibyo to ask state banks to buy rupiah in a bid to shore up the falling currency.
Abdurrahman reiterated on Tuesday that the current weakening of the rupiah against the U.S. dollar was temporary, but warned that it should not be perceived as a small problem.
"I expect the finance minister to persuade state banks and banks under government control to help (stabilize the rupiah)," he told reporters at a news conference explaining the results of his late meeting with senior government officials on Monday.
In addition to state banks, the government also controls several privately owned banks which have been taken over by the Indonesian Bank Restructuring Agency (IBRA), a unit of the finance ministry.
Abdurrahman, who is also known as Gus Dur, also called on the supposedly independent Bank Indonesia to take stronger action to safeguard the local currency.
"I thank Bank Indonesia for the actions they have taken, but there seems to be a need for stronger action to support the rupiah," he said.
The President's request goes against a statement by Bank Indonesia deputy governor Miranda Goeltom who said on Monday that the central bank would not take stronger monetary action to boost the rupiah.
Miranda said that boosting interest rates or selling dollars would not be effective in strengthening the rupiah because the primary forces behind the currency's fall were nonmonetary factors, including domestic political uncertainty.
Bank Indonesia became an independent central bank last May.
Meanwhile, dealers said that the President's calls for action to support the local currency helped prevent a further fall of the rupiah on Tuesday.
The local unit closed relatively unchanged at Rp 8,535 per U.S. dollar, compared to its Monday close of Rp 8,540.
A media statement issued by the State Palace said that Abdurrahman had also instructed the finance minister to review the impact of the current weakening of the rupiah on the assumptions used for the 2000 state budget.
"The President has instructed the finance minister to review the impact of the depreciating rupiah on the (macroeconomic) assumptions of the state budget, and to take necessary action to minimize any negative impact," the statement said.
The government based the state budget on an exchange rate assumption of Rp 7,000 per dollar, inflation assumption of 5 percent to 7 percent, and economic growth of 3.8 percent.
Separately, Bambang Sudibyo said on Tuesday that he had reviewed the 2000 state budget and concluded there was no need to revise the assumptions despite the fall of the rupiah.
"I have calculated that there is no need for a revision. Our spending and revenues are in balance, so our budget is still safe," Bambang told reporters after meeting with Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie.
The President said that the drop of the rupiah against the U.S. dollar was due to a combination of external factors, including the falling U.S. stock market and anticipation of an increase in U.S. interest rates, and domestic problems.
But Abdurrahman said that the domestic problems were temporary and were expected to be only short-lived.
He said that some people had temporarily left the country on fears of possible widespread demonstrations in the middle of this month to commemorate the massive 1998 May rioting which led to the downfall of then president Soeharto.
Abdurrahman also attributed the weakening of the rupiah to the slow work of the bureaucracy in tackling economic problems.
"These sorts of things were discussed at our (Monday) meeting," he said. (rei/prb)