Joint intervention to shore up rupiah temporarily halted

By Devi M. Asmarani

KUALA LUMPUR (JP): Indonesian Finance Minister Mar'ie Muhammad said here yesterday that joint intervention with Singapore and Japan to prop up the rupiah has been temporarily suspended.

Speaking at the end of the two-day meeting of the finance ministers of the nine-member Association of Southeast Asian Nations (ASEAN), Mar'ie said that the joint intervention had temporarily been stopped.

"I think, for the time being, we will not intervene against the market," Mar'ie told journalists following the meeting, which also had participants from Australia, China, Hong Kong, Japan, South Korea and the United States.

He said in the present situation where the regional market was very volatile due to the impact of South Korea's monetary difficulties, the intervention would not be effective.

Mar'ie said that the joint intervention could be pursued in the future, especially after the market turmoil in South Korea had become calmer.

The Monetary Authority of Singapore and the Bank of Japan have recently bought rupiah on behalf of the Indonesian central bank, Bank Indonesia, to shore up the currency.

Japanese Vice Finance Minister Eisuke Sakakibara confirmed that the Bank of Japan had jointly intervened to shore up the rupiah, saying that the practice was the first made outside the Group of Seven (G-7) developed countries.

"When there is an appropriate time, we may intervene again. Our intervention some time ago was successful," Sakakibara said.

In Jakarta, the rupiah fell to a day low of 3,840 against the greenback yesterday before settling to 3,815/35 at the close.

"The rupiah is not the only currency falling now. So are the Malaysian ringgit and the Thai baht," Mar'ie said. "Even the Japanese yen fell to 128 and the Korean won had long broken the psychological barrier of 1,000 to 1,240," he added.

The minister said that the uncertainty in the regional currencies were caused by the uncertainty regarding the IMF bailout program for South Korea.

Mar'ie also denied that the persistent drop in the rupiah against the U.S. dollar was due to conflicting statements made by Indonesian officials about the use of bilateral aid from Singapore.

The recent meeting between President Soeharto and Singapore Prime Minister Goh Chok Tong had clarified the matter, he said, adding that the government would not use the funds to bail out the private sector's debts as feared.

Indonesia received a US$23 billion bailout brokered by the International Monetary Fund and more than $15 billion in bilateral aid packages from Japan and several other countries.

Speaking to Indonesian reporters covering the meeting, Mar'ie again stressed that the government would never use the IMF-led financial aid to bail out ailing Indonesian companies.

The minister said that the private sector should not rely on the government in dealing with their mounting offshore loans.

"The government shows the way how to cope with their debts. But private companies should have their own initiatives how to solve their debt problems," he said.

He said that private companies should talk directly to their creditors if they wanted their debts to be rolled over.

The minister promised that the government would help the private sector to lobby their lenders to roll over their debts. "But for sure, the government will not help them with money to pay their debts," he added.

Bank Indonesia's managing director Paul Sutopo Tjokronegoro said last week that at least 40 percent of private short-term foreign debts due for repayment by March next year might be rolled over.

He said that the rollover of the private debts followed lobbying by the Indonesian government with Japanese creditors.

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