Fund managers told dollars available
Fund managers told dollars available
JAKARTA (JP): Minister of Finance Mar'ie Muhammad challenged speculators yesterday with the announcement that the government will meet all their demands for U.S. dollars.
"I challenge everybody. How many dollars do they want, I'll pay. Even for forward purchases. It doesn't matter," Mar'ie told journalists after addressing a seminar conducted by the Prasetia Mulya School of Management yesterday.
Mar'ie made the remarks in response to rumors that foreign fund managers, fearing that the Indonesian government would devaluate the rupiah as Mexico did, dumped rupiah and bought U.S. dollars and other foreign units.
Mexico devaluated its peso by 15 percent on Dec. 20. The impact of the move has caused the currency to lose nearly 70 percent of its pre-devaluation level against the green back.
The minister pleaded that people should not speculate on the devaluation of the rupiah because the Indonesian economy bears no resemblance at all to that of Mexico, which is suffering an economic crisis following last month's devaluation.
"Nothing to worry about. Don't just believe in rumors," Mar'ie pleaded.
Supporting Mar'ie's contention, the Governor of Bank Indonesia (the central bank), J. Soedradjad Djiwandono, told the seminar that the Indonesian economy is in solid condition and the ratio of its current account deficit to the gross domestic product is still at a healthy level of 2.1 percent, as compared to some eight percent in Mexico.
"Indonesia's economic growth of seven percent is much higher than the 2.9 percent in Mexico," he told the seminar participants, adding that the credit rating of Indonesia is Triple B while that of Mexico is only Double B Plus.
Soedradjad said the central bank opened its office on Saturday, which it usually does not, for those who wanted to purchase dollars.
The opening of the foreign exchange clearing on Saturday, he said, was part of the central bank's efforts to stem the rush for the dollar.
Buying
Soedradjad told reporters following the seminar that Bank Indonesia bought $500 million in American greenbacks last week to stabilize the rupiah, which declined to its low of Rp 2.285 against the dollar on the spot market Thursday.
The value of the rupiah against the dollar strengthened to Rp 2,219 on Friday afternoon following the central bank's intervention.
The central bank governor appealed to local businesses not to be affected by the actions of the foreign fund managers, whom, he said, were not really well informed about Indonesia's economic condition.
"If you pull your money out of Indonesia, where will you invest your money," he said as he tried to convince business people that Indonesia not only has strong economic fundamentals but also is much more attractive than most of developing countries or even some industrialized nations.
He explained that besides the fact that the position of its current account deficit is still much lower than the international standard, Indonesia still holds a significant amount of foreign reserves.
"Indonesia's foreign reserves are approximately $13.7 billion at present," he said, adding that the reserves, excluding short- term funds, are enough to finance five months of imports, or much longer than the minimum standard of three months.
"In addition the central bank has a standby loan of approximately $2 billion in overseas banks," he said of Bank Indonesia's financial strength.
He said he believed that the situation would return to normal this week as "playing" with dollars could be costly for individuals or institutions as they have to pay a high spread when they resell the currency.
The central bank expanded the spread of the buying and selling rates for the U.S. dollar to Rp 30 in September last year from Rp 20 in late 1993 and Rp 10 in early 1993 in efforts to curb speculative trading.
Soedradjad said the central bank has no plan to widen the spread again even though the current margin has not been effective enough to curb the speculation.
Tycoons Eka Tjipta Widjaja and Sofjan Wanandi yesterday hailed the government's assurance that it will not follow Mexico's path. Sofjan, president of the Gemala Group, said that capital outflow is very small and temporary and it is only done by foreign fund managers.
"I believe that they will very soon buy the rupiah again," Sofjan told journalists.
Economists Mari Pangestu and Djisman S. Simandjuntak shared the view that the impact of Mexico's crises on Indonesia and other emerging Asian markets is over. (rid/hen)