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)