BI to continue intervention to help rupiah, Sjahril says
BI to continue intervention to help rupiah, Sjahril says
JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on
Friday that, if necessary, the central bank would continue to
intervene in the financial market to help the beleaguered rupiah.
The comment helped push the rupiah slightly up from the day's
low of Rp 9,890 per U.S. dollar, ending at Rp 9,860 in late
trade, unchanged from the level on Thursday.
"We'll continue to intervene if necessary," Sjahril told
reporters at Bank Indonesia headquarters.
Analysts said that with gross foreign exchange reserves
standing at more than US$29 billion, Bank Indonesia had
sufficient ammunition to undertake any necessary intervention.
The rupiah has plunged to its lowest level in more than two
years, briefly skirting around Rp 9,900 per dollar earlier this
week.
Sjahril also said that the new foreign exchange ruling
introduced by Bank Indonesia in the middle of January helped the
currency remain below the Rp 10,000 to the dollar level.
"The new forex ruling has been effective," he said.
The forex ruling basically bans the transfer of rupiah to non-
residents to help curb speculation against the local unit
overseas. The measure is aimed at reducing the volatility of the
rupiah's exchange rate.
But Sjahril reiterated that Bank Indonesia had no intention of
introducing capital control.
The new forex ruling has raised fears that it was a
preliminary step toward Malaysian-style capital control.
Traders said that the sharp plunge in the rupiah this week was
caused by several factors.
Worsening relations between the government and the
International Monetary Fund (IMF) had raised fears that the Fund
would continue to delay the disbursement of its next US$400
million loan tranche to the country, which could prompt other key
multilateral and bilateral lenders to also halt their assistance
to Indonesia.
Such a scenario would have a devastating impact to the
country's state budget and economy.
The IMF delayed disbursement of the funds due to concerns over
the government-proposed bill on the amendment of the central bank
law, the new fiscal decentralization policy and delays in the
sale of government ownership in the publicly-listed Bank Central
Asia (BCA) and Bank Niaga.
But Coordinating Minister for the Economy Rizal Ramli claimed
earlier this week that he had managed to reach agreement with the
IMF over the delicate issue of amendments to the central bank
law.
The House also approved on Thursday the government plan to
sell BCA and Bank Niaga.
Minister of Finance Prijadi Praptosuhardjo said that this was
a positive development which would improve relations with the
IMF.
The recent ethnic violence in Sampit, Central Kalimantan,
which has killed hundreds of people, also created jitters on the
financial market with fears that the bloody unrest could spread
to other parts of the country.
Fears that the rupiah might drop below the Rp 10,000 level
prompted corporations to purchase dollars in a bid to secure
resources before repaying maturing overseas debt.
Analysts, however, said that the prospect of the rupiah
plunging beyond the Rp 10,000 level was very slight.
They said it would be unlikely that indebted companies will
continue purchasing dollars at a very high rate.
They also said plans by the Indonesian Bank Restructuring
Agency (IBRA) to sell its dollars would prevent the prospect of
the rupiah continuing to fall beyond the Rp 10,000 level.
Experts pointed out that IBRA would have to sell its dollars
if the rupiah fell below Rp 10,000 to make huge profits.
IBRA has more than $500 million to sell on the markets this
year. The agency obtains the currency from the sale of its
various banking assets.
Meanwhile, Dow Jones said that with President Abdurrahman
Wahid still under attack from the House of Representatives, the
rupiah would likely test the Rp 9,910 resistance level next week.
The domestic spot market will be closed on Monday for a
national public holiday, reopening again on Tuesday. (rei)