Central bank warns of trade deficit, forex shortage
Central bank warns of trade deficit, forex shortage
Urip Hudiono, The Jakarta Post, Jakarta
Bank Indonesia has warned that an imbalance in Indonesia's oil
trade account and a possible shortage in foreign exchange would
hurt the country's monetary position, and therefore affect this
year's economic growth projection of 5.5 percent.
"These two main issues should be promptly addressed, otherwise
they will erode the country's monetary resilience, as well as the
whole economy," BI Governor Burhanuddin Abdullah said on Tuesday.
Explaining the central bank's board of governors' first
quarter assessment of the country's economy, Burhanuddin said BI
had been observing that the country's trade account --
particularly in the oil sector -- had been experiencing a deficit
of US$2 billion per year.
"This is an alarming figure and has to be compensated from
other sectors," he said. "Based on our projection, we also see
that the country may experience a shortage in foreign exchange of
between $12 billion and $15 billion this year."
In its annual economic report, BI recorded that Indonesia's
oil trade account had switched to a $2.56 billion deficit last
year from a $38 million surplus in 2003. The country's gas and
non-oil-and-gas trade account, however, still experienced a
surplus of $9.05 billion and $14.74 billion, respectively.
BI recently reported that Indonesia's foreign currency reserve
reached $36.07 billion in the first week of April, up by $40.9
million from the previous week.
A shortage in foreign exchange could affect the rupiah's value
and put more pressure on Indonesia's inflation rate, which the
Central Statistics Agency reported as reaching an on-year 8.81
percent high in March.
BI recorded the rupiah as having been trading at an average of
Rp 9,279 to the dollar during this year's first quarter.
Indonesia's economy, meanwhile, grew by between 5 percent and
5.5 percent during the first quarter, and could grow by up to 6
percent by the end of the year.
Burhanuddin said the cause of the two problems lay in the fact
that the country's export activities remain slow, as compared to
domestic consumption, which is still the country's main economic
growth engine.
"Although exports have been improving, growth has yet to reach
an adequate enough pace," he said. "We must therefore still
increase our exports."
Increasing exports alone, however, would not be enough,
Burhanuddin said, as BI had also observed that much of the export
revenue was not actually coming into the country.
"It is a common practice to deposit the revenue overseas,
which can be clearly observed through the existing gap between
the export reports and the actual money coming into the country,"
he said.
To resolve this, Burhanuddin says that the government, the
country's business community and BI should sit together and find
appropriate solutions to repatriate these funds.
Meanwhile, to reduce possible inflationary pressure due to the
two issues, BI will continue its tight monetary policy in the
next quarter, including adjusting its benchmark SBI interest
rate.
BI deputy governor Hartadi A. Sarwono, however, denied that
the central bank had plans to raise the SBI interest rate to 8
percent by the end of the year.
"There is no such target. We will monitor the country's
monetary situation every month, and act accordingly," he said.