Rizal blames politics on rupiah's fall

Rizal blames politics on rupiah's fall

JAKARTA (JP): Coordinating Minister for the Economy Rizal
Ramli said on Thursday the weakening of the rupiah against the
U.S. dollar was in part the result of domestic political
concerns.

Rizal said the fair value of the rupiah was at about Rp 8,000
per dollar.

"It (the weakening of the rupiah) is because of the political
situation," he said.

Rizal's comments failed to improve the sentiment on the
currency.

The rupiah fell to Rp 9,010 against the dollar late on
Thursday, its lowest level since July. The currency closed at
Rp 8,950 to the dollar on Tuesday, with the onshore market closed
on Wednesday for a public holiday.

Asked whether the government would take action to help prop up
the ailing currency, he said any intervention would depend on
Bank Indonesia, the country's independent central bank.

He added that prospects for the strengthening of the rupiah
depended on developments on the political front.

Political opponents of President Abdurrahman Wahid have
increased their pressure in what many see as an attempt to oust
the country's first democratically elected President.

Abdurrahman also has been under attack over financial scandals
allegedly involving people close to him.

Also, social unrest and riots continue to plague several areas
of the country.

Meanwhile, dealers said the rupiah's weakening also was
attributable to weakness in the Philippine peso, which fell on
Thursday amid pressure for President Joseph Estrada to step down
over corruption allegations.

Bank Indonesia deputy governor Achjar Iljas said earlier the
central bank would continue to help limit the pressure on the
rupiah by controlling the growth of base money.

"Bank Indonesia has set a certain target growth for base
money. But in practice, this is not always easy to implement," he
said.

He did not say whether the central bank would take more
drastic measures to lift the rupiah.

Achjar said the current weakening of the rupiah was related to
the increasing risk premium on Indonesia, as the domestic
political situation remained unstable.

He added that dollar demand for debt repayments was also a
factor behind the rupiah's continued fall.

Bank Indonesia said recently private sector foreign debt
falling due in the fourth quarter of this year amounted to more
than US$9.2 billion.

A stronger rupiah is a cornerstone of the country's economic
recovery. The government has assumed an exchange rate of Rp 7,300
per dollar and an economic growth rate of 4.5 percent in the 2001
State Budget.

The rupiah has hovered between Rp 8,500 and Rp 8,900 per
dollar over the last several months.

The recent success in convincing international donors grouped
in the Consultative Group on Indonesia to provide the country
some $4.8 billion in loans to help plug the 2001 budget deficit
failed to lift the rupiah, as the news was overshadowed by
political concerns.

Standard & Poor's recent decision to upgrade Indonesia's
rating also failed to lift sentiment on the rupiah. (rei)