RI deems forex monitoring plan acceptable
JAKARTA (JP): The International Monetary Fund (IMF) should have no reason to forbid Indonesia from implementing its proposed foreign exchange monitoring system, the country's senior economics minister said on Monday.
Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said that every country had the right to implement its own foreign exchange system.
"I don't think there will be any problem with the IMF if its about the monitoring system, meaning that every country has the right to implement its own system," he told reporters after chairing a monthly meeting of economics ministers.
The IMF is organizing a multibillion bailout in exchange for Indonesia implementing a wide-ranging economic reform package to help lift the country from its worst economic crisis in three decades. The value of the rupiah has plunged by more than 70 percent against the U.S. dollar from its pre-crisis level in July last year.
The Fund is traditionally a staunch supporter of a free foreign exchange system.
IMF Asia Pacific director Hubert Neiss is expected to arrive in Jakarta on Wednesday for a monthly review of the country's economic reform programs.
"I'll check with him (Neiss) if he has any problem with our plan," Ginandjar said.
He reiterated that Bank Indonesia was studying various mechanisms to improve the monitoring of capital flows, including the model adopted by Chile where short-term capital inflows were controlled.
News that the government plans to introduce some form of capital control reemerged last week when Ginandjar was quoted by a newspaper as saying that the government was considering forcing exporters to report their hard currency earnings to the authorities for monitoring purposes.
Fears of the capital control helped the rupiah to strengthen significantly to Rp 9,050 against the U.S. dollar last week, from between 10,500 to Rp 11,000 in the previous weeks.
In Semarang on Monday former finance minister Fuad Bawazier warned that the government should not resort to any form of capital controls due to the country's weak legal system. He said controls would only prompt black market activities to flourish.
He, however, supported plans to monitor capital flows, and suggested that for any system to be efficacious, Bank Indonesia should be joined by the tax directorate general in managing the monitoring system, as happened in the U.S.
"With such a system, we can check and monitor where the money comes from, whether it is from speculation activities, money laundering or income which hasn't been taxed" he said. (rei/har)