New BI governor sees CBS as attractive
New BI governor sees CBS as attractive
JAKARTA (JP): Bank Indonesia's (BI) new governor, Sjahril
Sabirin, said yesterday he saw the currency board system as an
attractive way to stabilize the ailing rupiah.
"Our focus in the days and weeks to come is to create a stable
and affordable rupiah exchange rate level," Sjahril said
yesterday after a ceremony marking the transfer of office from
his predecessor J. Soedradjad Djiwandono to himself.
He said the currency board system (CBS), which would peg the
rupiah to a foreign currency at a fixed exchange rate, was an
attractive option to support the currency.
However, preparations for the system must be done thoroughly,
he said, adding that if the system was set up, it would not be
rushed and would be well-prepared.
He said if the plan was implemented, the central bank would
control the system.
"At this point, as far as we have been following, CBS will
function under BI," he said.
Sjahril said the fall in the rupiah against the U.S. dollar to
about 9,500 at present from Rp 2,450 in July, has badly affected
all sectors of the economy.
"If it stays at the current rate for a long time, a lot of
suffering will occur, not only in the business sector but also to
common people," he said.
Whether the government would implement a currency board or
not, Sjahril said stabilizing the rupiah was an urgency and
needed to be resolved immediately.
Sjahril also denied that anticipation over the government's
currency board plans has caused a scarcity of funds in banks
during the past week.
Domestic and foreign banks are currently offering high
interest rates to herd back public funds -- an indicator of tight
liquidity.
"We have to check on it first, but this is a market mechanism.
It may just be flows of funds from one bank to another," he said.
He said the rise in interest rates had no connection with any
public anticipation to buy dollars at a more favorable exchange
rate after a currency board implementation.
The rupiah has lost over 70 percent of its value against the
dollar since the crisis began in July.
Sjahril was appointed by President Soeharto last week,
replacing Soedradjad, who was said to oppose the currency board
system.
Minister of Finance Mar'ie Muhammad told the House of
Representatives Monday that the final decision on the currency
board rested with President Soeharto.
The United States, European governments and the International
Monetary Fund (IMF) have criticized the plan.
The IMF has threatened to cut off its US$43 billion bailout
program if Indonesia proceeds with the CBS.
The Golkar faction in the House of Representatives Commission
VIII for state budget and finance, research and technology
yesterday urged the government to issue a clear-cut decision on
the CBS as soon as possible.
"Although there are problems with the IMF, the Golkar faction
expects a clear and decisive move on CBS or other appropriate
measures that could bring the rupiah exchange rate to Rp 5,000
per U.S. dollar," said Paskah Suzetta, Golkar's spokesman, at a
meeting with Finance Minister Mar'ie Muhammad.
"If the IMF doesn't agree (with Indonesia's CBS plan), it
should come up with other alternatives," added House member Indra
Bambang Utoyo, who summed up the commission's final hearing on
the 1998/1999 state budget proposal.
Golkar, Suzetta said, approved of the government's plan to
implement a currency board as an alternative to deal with the
monetary crisis. (das/08)