Fix rupiah without delay

Independent of the IMF-plus, which may include a currency board system, the government should immediately fix the exchange rate of the rupiah at Rp 5,000 to one U.S. dollar, in line with the 1998/1999 state budget.

The risk of doing this is that people in the currency game will buy up dollars. A policy against such a rush is needed:

1. During the monetary crisis, every buyer of dollars/foreign exchange should be obliged to pay an additional minimum of Rp 4,000 per dollar into a national development rehabilitation fund. Transactions should take place only at state-owned banks or appointed private banks. The rule also applies to foreign exchange deposits paid in rupiah.

2. The Rp 5,000 rate should be used for transactions of dollars converted into rupiah. An income tax would be further applied on the difference of exchange rate in July 1997 and the date of the transaction.

3. The rehabilitation fund should be used to provide subsidies for imports, boosting exports, curbing prices of staple foods, medicines, etc.

A fixed rate is expected to revive all sectors which seem to have collapsed.

BACHRAWI SANUSI

Jakarta