Political situation 'still haunts rupiah'

Political situation 'still haunts rupiah'

JAKARTA (JP): Bank Indonesia Governor Sjahril Sabirin said on
Monday the domestic political situation was still weighing on the
exchange rate of the rupiah against the U.S. dollar.

Sjahril reiterated that once the political uncertainty
subsided, the rupiah should return to the 7,000 level or stronger
against the dollar.

"The market is still waiting for more favorable developments
in politics," he said following a meeting with senior economic
ministers.

Sjahril was responding to a further weakening in the rupiah
against the dollar on Monday. The local unit closed at Rp 8,030
to the dollar compared to its Rp 7,925 opening.

The rupiah weakened after President Abdurrahman Wahid
dismissed two key economic ministers early last week in a move
that created political uncertainty, because the fired ministers
represented the two largest political parties (Golkar and
Indonesian Democratic Party of Struggle, or PDI Perjuangan).

Sjahril said the rupiah should strengthen because of positive
developments in macroeconomic indicators.

The Central Bureau of Statistics reported on Monday that
Indonesia's exports grew by 30 percent in the first quarter of
this year, while inflation only increased by 0.56 percent in
April from the previous month.

However, the stronger export performance failed to strengthen
the rupiah.

Meanwhile, the newly appointed chief of the Jakarta Initiative
Task Force (JITF), Bacelius Ruru, said a deal to restructure some
US$3 billion in corporate overseas debts was expected to be
reached by the end of May.

He said the debts were owed by three large domestic companies.
"We will try to reach as many restructuring deals as possible,"
he told journalists following a meeting with senior economic
ministers.

Ruru said JITF expected to facilitate the restructuring of
some $10 billion in overseas corporate debts this year.

The task force was established by the government in early 1998
to help assist in the restructuring of the country's private
sector debt. Over $20 billion in corporate overseas debts is to
mature this year.

Corporate restructuring is one of the top economic measures
agreed to with the International Monetary Fund (IMF) help the
economy recover.

The JITF plans to provide various incentives, including tax
breaks, to encourage debtors and creditors to reach a
restructuring deal.

The government began talks on Monday with a team from the IMF
to review the country's progress with its economic programs and
to design a new letter of intent.

The letter will be delivered at a meeting of the IMF's board
of directors in Washington later this month, and will be the
basis on which the fund decided whether to disburse some $400
million in new loans to Indonesia.

The money was to have been disbursed last month, but was
postponed because the government failed to meet the March 31
deadline to implement key economic programs. (rei)