Govt, businessmen argue over ideal level for rupiah

JAKARTA (JP): Recent advances made by the rupiah against the U.S. dollar has left the government and the business sector arguing over the ideal level for the currency in the economy's present state.

The latest call for a limit to the sharp appreciation of the rupiah came from commodity and furniture exporters, who said the dramatic appreciation of the currency in the money markets had presented them with a serious cash flow problem. They explained that they buy raw materials for their exports at an assumed exchange of over Rp 8,000 to the dollar, but export revenues are now being realized at around Rp 7,000.

"We feel that we must remind the government to limit the sharp appreciation of the rupiah because it will have a negative impact on exporters, especially small and middle-sized exporters," said Firdaus Juven, a director of PT Chempex Jaya.

Firdaus claimed that 13 other exporters had voiced similar concerns.

"Many exporters are now unsure about whether to purchase (raw materials) because they fear the rupiah may jump to the Rp 5,000 level," he said in statement on Saturday.

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita caused controversy on Wednesday by saying the ideal level for the rupiah was between Rp 7,000 and Rp 8,000. He argued an exchange rate in that band would maintain the competitiveness of Indonesian exports in the region.

His comments brought the recent appreciation in the rupiah to an immediate halt and sent it sliding back to Rp 7,850 at the close of trade on Friday, down from an eight-month high of Rp 7,050 reached earlier in the week.

Bank Indonesia Governor Sjahril Sabirin said on Friday that the rupiah would still be able to reach a level of between Rp 6,000 and Rp 6,500 on the back of improving economic fundamentals and renewed confidence in the country.

He stressed that a stronger rupiah would not hurt the competitiveness of exports and said it would instead cut the cost of raw materials for exporters.

"At a level of between Rp 6,000 and Rp 6,500, exporters will be able to buy raw materials at cheaper prices," he said.

The rupiah has risen sharply from over Rp 11,000 last month on the back of various factors including the strengthening of the yen against the U.S. dollar, government dollar selling, improving domestic economic indicators and positive remarks made by the IMF regarding progress in the country's program of economic reform.

Bank Indonesia director Miranda Goeltom was also upbeat about prospects for the rupiah to strengthen beyond the Rp 7,000 level and stressed that the central bank would not restrict the appreciation of the currency.

She said that a stronger rupiah would be beneficial to local companies saddled with massive overseas loans. (rei)