Government urged to go all-out to stabilize rupiah

Government urged to go all-out to stabilize rupiah

JAKARTA (JP): Legislators and business leaders urged the
government yesterday to go all out in stabilizing the rupiah's
exchange rate at Rp 4,000 to the U.S. dollar this year to help
Indonesia's ailing economy.

They were commenting on the government's 1998/1999 draft state
budget unveiled Tuesday which was based on an average exchange
rate of Rp 4,000 to the dollar between April 1998 and March 1999.

"The government's goal to return the rupiah to Rp 4,000
against the dollar should be given top priority," the chairman of
the United Development Party faction in the House of
Representatives, Hamzah Haz, said.

Soeharto said in his speech Tuesday night the government did
not want to see the rupiah too strong, thus weakening the
country's export competitiveness.

Neither did the government want to let the value of the rupiah
become too weak, he said, as it would burden the country's
economy.

The rupiah further plunged to over Rp 8,000 to the dollar
yesterday.

Hamzah said the 1998/1999 budget was the most difficult one in
the past 30 years.

Legislators I Ketut Arcana and Eky Syachrudin said the
government's decision to assume an exchange rate of Rp 4,000 for
next fiscal year was a political move to restore market
confidence.

"The government must have its own rationale to use the
exchange rate at that level," Eky, a member of the Golkar faction
at the House, said Tuesday.

"I think it's the President's political move. The rupiah must
be strengthened to that level again, as Pak Harto's authority is
at stake," he said.

Arcana, the chairman of House Commission VIII for state budget
and finance, called the decision a bold and commendable move.

Arcana said the target's realization, however, would depend on
the government's consistency in restoring confidence in the
rupiah.

Some economists saw the exchange rate projection as
unrealistic and highly optimistic.

Gadjah Mada University economist Arief Ramelan Karseno said
yesterday the targeted rate of Rp 4,000 would be very hard to
realize.

"When President Soeharto delivered the draft budget, the
rupiah's value had sunk to Rp 7,900 to the dollar," he said.

He said many sectors in the Indonesian economy would be
disrupted if the target was not reached.

If the rupiah continues to remain below Rp 4,000 to the
dollar, many companies could collapse under their foreign debts,
causing more people to lose their jobs and slashing government
revenue from taxes.

University of Indonesia economist Anwar Nasution said the
rupiah would not strengthen unless effective and comprehensive
economic reforms were carried out.

Anwar said the rupiah would strengthen if people's confidence
in the government's measures and policies returned.

"The rupiah's value will continue to decline if the government
does not give a clear indication that it is really serious about
restructuring the banking system and that it is helping to cope
with the problem of huge bad loans," Anwar was quoted by Antara
as saying.

Business leaders reacted more positively to the government's
target of stabilizing the rupiah at Rp 4,000.

Noted businessmen Tanri Abeng and Sudwikatmono said the
exchange rate target was realistic and optimistic.

Tanri, president of Bakrie & Brothers, said the exchange rate
was reasonable compared to the current exchange rate.

"What is not realistic is the current exchange rate, because
it is the result of excessive speculation," Tanri added.

PT Indocement president Sudwikatmono and hotelier Sukamdani
Sahid Gitosardjono said the Rp 4,000 rate could be used for
business transactions and for paying expatriate employees.

Tanri Abeng said the government should convince the market
that it would balance the supply and demand of dollars here.

This could be achieved by helping the private sector rollover
their maturing short-term loans, Tanri added. (das)