Mon, 24 Apr 2000

Bolstering the rupiah

The rupiah sank to a new low last Thursday. At a close of Rp 8,000 -- Rp 7,995 to be precise -- to the U.S. dollar, it reached the lowest point in the past six months. This continuing decline of the rupiah's value is a great concern to us all as it will be impossible for our economy to recover with the currency continuing to be weak.

Two major factors are the cause of this weakening. In our private sector, the need for dollars is rising sharply. Although our government's debts are no longer under pressure since the Paris Club agreed to reschedule $5.8 billion of those loans last week, our private offshore loans are still a problem. With $29 billion of these loans due for payment this year, it can be easily understood why the rupiah continues to be under pressure.

How to overcome this obstacle? These loans have to be "eliminated". Perhaps a second Frankfurt Agreement (for granting relief) is needed. It would be even better if those loans could be converted into shares. Although it will not be easy, it seems that steps in that direction need to be taken.

-- Bisnis Indonesia, Jakarta