BI warns speculators of deportation
BI warns speculators of deportation
JAKARTA (JP): Bank Indonesia senior deputy governor Anwar
Nasution warned on Wednesday that foreign currency traders and
bankers violating prudential banking rules would be expelled from
the country.
Anwar said that the central bank would now be more serious in
enforcing the country's banking regulations.
"If the foreign bankers violate (the regulations), they will
be deported. We don't need those kind of people in this
Republic," he told reporters at a weekly press gathering.
He said that local traders and bankers proved to be violating
the regulations would be banned from entering the industry for
the rest of their lives.
In a bid to help curb speculation in the rupiah, Bank
Indonesia has sent its inspectors to foreign exchange banks
operating in the country to ensure that they abide by the
existing prudential regulations, including a prohibition on banks
exceeding the daily 20 percent net open position limit, and from
opening forward dollar contracts worth more than US$5 million
with non-residents.
The central bank has said that it would continue the on-the-
spot inspection measures.
Anwar said that such measures had helped in the recent
strengthening of the rupiah against the U.S. dollar.
The rupiah has been hovering at around Rp 8,600 lately
compared to a 21-month low of Rp 9,570 per dollar last month.
Anwar also said that the central bank is committed to
maintaining the current free float exchange rate system which was
introduced in August 1997.
"We have no intention of returning to the fixed exchange rate
system nor implementing a currency board system (CBS)," he said.
He stressed that this commitment is contained in the recent
letter of intent agreed by the government and the International
Monetary Fund.
He explained that in addition to the lack of supporting
resources, the country's economic and political conditions were
not in a such a bad shape as to force the authorities to
introduce a drastic measure like the CBS system.
"But if the economic and political conditions become
completely chaotic, then I would not be against introducing the
CBS," he said.
Under the CBS system, the rupiah would be pegged at a certain
rate to a hard currency like the U.S. dollar.
There have been reports that some members of the People's
Consultative Assembly (MPR), the country's highest legislative
body, have been pushing for the introduction of the CBS system to
help stabilize the ailing rupiah.
An earlier attempt by former president Soeharto's
administration to introduce the CBS system failed due to its
widespread rejection.
Anwar said that he expected the rupiah to continue
strengthening as the economy recovers and confidence returns.
"I'm certain that the recent strengthening in the rupiah is
because of the return of confidence, especially among the
(country's) exporters," he said.
Bank Indonesia held a meeting last week with the country's
exporters in a bid to persuade them to park their export earnings
in the country instead of overseas.
There has been speculation that some US$80 billion in
Indonesian export earnings is parked overseas.
Meanwhile, the rupiah declined slightly late on Wednesday to
Rp 8,625 per U.S. dollar compared to Rp 8,605 late on Tuesday.
In a related development, the central bank also reported
Wednesday that the country's gross foreign exchange reserves rose
to $27.56 billion in the week ending Aug. 4, from $27.41 billion
a week earlier.
Bank Indonesia said the increase was due to the higher
receipts from the sale of oil.
The central bank also reported that the benchmark interest
rate of Bank Indonesia one-month SBI promissory notes was
unchanged at 13.52 percent on Wednesday's auction.
The interest rate on three-month SBI notes declined to 13.29
percent compared to the previous level of 13.49 percent.
Bank Indonesia senior official Tarmiden Sitorus said that
there was still room for the central bank to allow a further
decline in the interest rate due to the strengthening of the
rupiah and improvements in the macro economic situation.
He, however, said that the central bank was still concerned
about the inflationary pressure to be created by the hike in fuel
prices later this year.
Bank Indonesia said in a statement earlier that it expected
the 5-7 percent inflation target for this year would be
exceeded.(rei)