BI upbbeat about economy amid unrest fears

BI upbbeat about economy amid unrest fears

AMSTERDAM (Dow Jones): Bank Indonesia Governor Sjahril Sabirin
Friday said he was "optimistic" that despite possible domestic
and international disruptions, Indonesian inflation and the
rupiah will stay within the levels targeted by the government in
its 1999-2000 budget.

Sjahril said, "People shouldn't get overly worried."

The central bank governor also said that the direction of the
Indonesian would likely remain the same even after the general
elections in June

"Whoever will win the elections, I think the current lines in
economic leadership will be continued," Sjahril told Dow Jones
Newswires in an interview during a four-day visit to the
Netherlands.

He didn't rule out the possibility of unrest during the run up
to the elections, however.

Jakarta released a draft of the 1999-2000 budget in January,
targeting annual inflation at around 17 percent and the currency
at Rp 7,500 to the dollar.

The rupiah closed Friday at Rp 8,850 against the American
greenback.

Meanwhile, Bank Indonesian Director Miranda Goeltom said
Indonesian interest rates were "within boundaries."

"Given the problems, like the scare of a (Chinese) yuan
devaluation and the crisis in Brazil, as well as some domestic
unrest, the rise in interest rates doesn't really show a jump,"
Miranda said.

Miranda also said she believes an interest rate level of
"around 30 percent" could be reached in the 1999-2000 budget
year, which starts on April 1, although she stressed the
government doesn't set targets for interest rates.

Friday in Jakarta, Indonesia's overnight interbank rate
-considered the benchmark rate- was between 31 percent and 34
percent for foreign and financially sound local banks.

About the restructuring of the country's banking industry, he
said fewer than 40 ailing banks will be closed around the end of
February.

"I think it will be below 40 banks," he said.

He declined to be more specific on the subject.

The Indonesian government previously has announced plans to
close by the end of February banks with a capital adequacy ratio
of worse than -25 percent, or whose business plans have been
rejected by the central bank.

Some small banks, seen earmarked for closure by the end of the
month, however, increased their bid rates to 60 percent, from 50
percent late on Thursday, as they are facing a liquidity
shortage.

Sjahril said his main purpose during his Dutch visit has been
to give "the real picture, first hand" of the Indonesian economy,
and what steps have been taken to tackle the country's problems,
including efforts to clean up the ailing banking system.

"We hope that our explanation here will help the Dutch banks
who are in Indonesia to make the right decision. Of course we
hope that they will stay, and even expand their investments,"
Sjahril said.

He met Thursday and Friday with the leadership of the Dutch
central bank and leading private banks such as ABN Amro, Rabobank
and ING.

Indonesia has been grappling with a financial crisis since the
latter part of 1997, the worst the country has seen in over three
decades, coupled with political volatility.