Govt, BI forecast rupiah stable at 7,000 to dollar

Govt, BI forecast rupiah stable at 7,000 to dollar

JAKARTA (JP): The country's senior economics minister and Bank
Indonesia said on Monday they expected the rupiah to remain
stable at around 7,000 to the U.S. dollar due to stabilization of
the political and security situation.

Speaking after meeting President Abdurrahman Wahid at Bina
Graha presidential office, Coordinating Minister for the Economy,
Finance and Industry Kwik Kian Gie said the rupiah should remain
stable despite unrest in Maluku and Aceh.

"I think that's (stabilization of the rupiah) because our
social and political situation in general has been stable, except
in Aceh and Ambon. But for business centers like in Jakarta,
that's not perceivable," he said.

Bank Indonesia governor Sjahril Sabirin said separately that
strife in outlying provinces of the archipelago should not affect
the central government and the rupiah.

"What really is happening is in the regions like in Ambon and
Aceh and not so much at the national level," Sjahril was quoted
by Dow Jones as saying in Singapore, referring to the Maluku
capital.

The central bank governor predicted that the rupiah should not
weaken below the level of 7,000 to the dollar merely because of
unrest in the provinces.

The stabilization of the rupiah, Kwik said, was also a normal
consequence of the recovery process of the economy from the
devastating crisis.

The crisis struck in July 1997 and deepened in 1998 when the
gross domestic product dropped 13 percent, inflation soared 78
percent and the rupiah hit an all-time low of 17,000 to the
greenback.

Kwik said a crisis of such magnitude would not be repeated.

"When we were in the crisis, the damage was severe. And
therefore, it (the rupiah) should be stable at this level. If
there are fluctuations, it will not be worse than that. That's
not because of the government's performance, but a natural
process."

Kwik said recent fluctuations in the rupiah were not unusual
and attributed them to the "market economy system".

"If we adopt the market economy system, there will always be
fluctuations of the currency," he said.

The rupiah, which was trading at 7,150 to the dollar around
midday Monday, weakened to around 7,270 last week in line with
the fall of the yen against the dollar as well as rumors of a
Cabinet reshuffle.

The announcement of damning audit results on Bank Indonesia by
the Supreme Audit Agency, in which the agency issued a "no
opinion" or "disclaimer" label, did not really affect the rupiah
in the market, Kwik said, because the market discounted the
situation.

"BI's case did not have any impact (on the rupiah), because
all damaging acts (in the central bank) happened in the past, and
we are experiencing all of its impacts now, in all our daily
lives."

Kwik said Bank Indonesia's argument that releasing the results
of the audit would have a damaging effect on the market and on
Indonesia's political risk level was proved baseless.

Kwik also said the government was in agreement with the
International Monetary Fund (IMF) over efforts to reform Bank
Indonesia, following the announcement of the audit results, as
the fund knew of problems at the central bank from the outset.

Kwik said the government would sign a new letter of intent
with the IMF on Jan. 20, the day when the government will present
its state budget draft to the House of Representatives.

"Everything has been settled with the IMF, but the IMF wants
to see developments from now through Jan. 20," he said. "These 10
days will be very critical, so we must work hard (to maintain
stability)."

The IMF, arranger of an international multibillion dollar
bailout for Indonesia, suspended loans to Indonesia last
September due to the high-profile Bank Bali scandal that tainted
the previous government. The fund has said it would resume loans
after a new letter of intent is signed and released.