IBRA selling its dollars to help stabilize rupiah
JAKARTA (JP): The Indonesian Bank Restructuring Agency (IBRA) has started converting its dollars into rupiah in a bid to help stabilize the beleaguered local currency.
Minister of Finance Prijadi Praptosuhardjo said on Thursday that the agency sold around US$17 million last week.
Asked whether IBRA would sell more dollars in the immediate future, Prijadi said that the agency was still awaiting "clearance" from the House of Representatives regarding a recent transaction with Malaysia's Kumpulan Guthrie Bhd., which is expected to fetch around $368 million.
"IBRA will sell its dollars gradually ... But it will also depend on (rupiah) market conditions," he told reporters on the sidelines of a meeting with the House state budget committee.
He declined to provide specific details on the market conditions that would be conducive for IBRA to conduct a further dollar selloff.
IBRA is a unit under the ministry of finance, controlling billions of dollars worth of various assets transferred from recapitalized and closed banks, and former bank owners. The agency is mandated to divest the assets and raise cash to help finance the state budget deficit.
IBRA is believed to control around $500 million from the sale of assets, including the proceeds from the recent Guthrie transaction.
In that deal, the agency sold some 25 palm oil plantations to Guthrie in January. The sale, however, became the subject of widespread protests, which included criticism from legislators.
"The transaction is already final, but we're still waiting for further clearance from the legislature," Prijadi said, adding that IBRA was expected to submit a full report about the transaction to legislators in the near future.
Prijadi, however, said that the conversion of IBRA's dollars was not primarily aimed at propping up the embattled rupiah, which dropped to a 30-month low of Rp 11,500 per U.S. dollar earlier this month.
"It (the rupiah's plunge) is not only due to the (dollar) supply and demand factor, but other non-economic factors including social and political conditions," he said.
"Even though we can supply the market with ample dollars, it will be ineffective if (political) uncertainty persists. So, we'll see how effective it will be," he added.
The rupiah ended higher late on Thursday at Rp 10,390 per dollar, compared to Rp 10,425 on Wednesday.
Dealers said that the lift in the local unit was supported by a concerted dollar selling campaign by Bank Indonesia amid lower dollar demand from the corporate sector.
Bank Indonesia senior deputy governor Anwar Nasution said that the central bank would continue its intervention measures, including the sale of its dollar reserves to help stabilize the rupiah, despite declining foreign exchange reserves.
Bank Indonesia has reported that the forex reserves fell to $28.57 billion as of the second week of March, down from $29.12 billion in the previous week. The central bank explained that this was partly due to the repayment of government overseas debt.
The central bank had also allowed the benchmark interest rate of Bank Indonesia one-month SBI promissory notes to increase to 15.24 percent on Wednesday from 14.94 percent in the previous week.
But Anwar added that Bank Indonesia's various measures to help boost the rupiah would be futile if security problems at home persisted and the implementation of key economic reform programs progressed slowly.
As an example, he pointed out that the security problem in Aceh, which had prompted U.S. oil and gas giant ExxonMobil to temporarily halt its operations, could cause a serious blow to the overall economy.
He also said that the slow progress in economic reform programs, such as privatization of state-owned enterprises and the sale of IBRA assets, would affect state revenue.
"These kinds of problems are far more crucial to be resolved compared to the measures that can be taken by Bank Indonesia in assisting the rupiah," Anwar said.(rei)