Govt consults IMF, WB on capital control plan
Govt consults IMF, WB on capital control plan
JAKARTA (JP): The government is consulting with the
International Monetary Fund (IMF) and the World Bank over plans
to implement a new system to monitor capital flows, according to
Coordinating Minister for Economy, Finance and Industry Ginandjar
Kartasasmita.
He said on Friday that the government needed to get the views
of various experts before implementing the new system so that it
would be effective and meet the government's objectives.
"We are seeking the views of the IMF and the World Bank so
that whatever we do will be truly effective," Ginandjar told
reporters.
He added that Bank Indonesia's governor and the finance
minister were also discussing the plans with the international
community in Washington.
"We're still studying various (models) used in other
countries," he said.
However, he reaffirmed that the government will not impose
strict capital controls.
Ginandjar explained that in principle, a freely floating
foreign exchange regime was the most appropriate for the country,
but said that improving the monitoring and reporting of foreign
exchange flows was essential.
Asked whether the country's exporters should surrender their
hard currency earnings, he said: "We hope so."
News that the government plans to introduce some form of
capital controls reemerged earlier this week when Ginandjar was
quoted by a newspaper as saying that the government was
considering obliging exporters to report their hard currency
earnings to the authorities for monitoring purposes.
Market players and analysts were convinced that this meant the
government would make it obligatory for exporters to surrender
foreign exchange earnings to the central bank because a non-
obligatory approach would not be effective in strengthening and
stabilizing the rupiah.
Analysts said that any rule forcing exporters to report or
surrender hard currency earnings to the central bank could be
interpreted as an undue control on the movement of capital.
However, the news has helped to send the rupiah to
significantly higher levels against the U.S. dollar over the past
couple of days.
Separately, Bank Indonesia Governor Sjahril Sabirin said on
Thursday in Washington that the introduction of a new currency
flow system would not take place this year.
"It is not coming out so quickly. We're not in a hurry. It's
unlikely within the year, but it could be next year," he told AFP
before winding up his visit to Washington for the IMF and World
Bank's annual meeting.
Finance Minister Bambang Subianto underscored the need for
both developed and emerging economies to devise a new system to
jointly monitor hedge fund operations.
He was speaking at a press conference on Thursday, the last
day of the annual meeting.
"It should not be done by only recipient countries. It should
be done on an international agreement," he said.
"A framework should be applied in many countries. This will be
a control system in the recipient countries and the home
countries of hedge funds," he said.
The IMF's interim committee reached a broad consensus on the
need to closely monitor operations of hedge funds as a result of
fears that short-term capital flows were capable of triggering a
global financial crisis.
Bambang said Indonesia was ready to push follow-up discussions
on the issue together with international institutions and
developed nations, including the U.S. and Japan. (rei)