Rizal plays down fears over current weakening of rupiah

JAKARTA (JP): Coordinating Minister for Economic Affairs Rizal Ramli said on Tuesday that the current weakening of the rupiah should not be of a great concern because food supply was more than sufficient.

Rizal said that the fall in the exchange rate of the rupiah against the U.S. dollar would have a serious impact on the overall economy if there was also a food supply shortage like the one which occurred in early 1998 when people had to queue to buy food.

"But now the food supply is quite sufficient. There are more than 2 million tons of rice in Bulog's warehouse," he told reporters following a meeting with government officials.

Bulog is the State Logistics Agency.

"I'm not worried as long as the supply of food is enough," he added.

He also said that in every economy as in the U.S. or other countries, the most important economic indicator was not the exchange rate but the unemployment rate.

Rizal said that the current weakening of the rupiah was largely due to political factors, not economic factors, as certain parties were trying to force President Abdurrahman Wahid to step down.

He said that Bank Indonesia had spent around US$10 million to intervene in the currency market to defend the ailing local currency.

But Rizal said that the plot to force the President to step down before his term ends would not succeed because Vice President Megawati Sukarnoputri had ordered her Indonesian Democratic Party of Struggle, the largest political party in the parliament, not to try to unseat the President unconstitutionally.

He added that Speaker of the House of Representatives Akbar Tandjung also shared the same view.

Rizal expressed confidence that the rupiah would strengthen again after the political pressure subsided due to the lack of support for parties seeking to unseat the President.

The rupiah ended at Rp 9,330 per U.S. dollar late on Tuesday compared to Rp 9,400 on Monday.

Dealers said that the local currency regained ground after it failed to further fall to below the psychologically sensitive level of Rp 9,500 during the day.

Dealers said that the rupiah was supported by Megawati's instruction to her party members not to join the increasing efforts to unseat the President, and by the report of Abdurrahman's good health after a routine physical checkup.

The rupiah has been under strong pressure over the past couple of weeks due to a combination of domestic political factors and a decline in regional currencies particularly the Philippines peso.

The International Monetary Fund warned the government on Monday of the danger if it failed to lift market sentiment.

Visiting IMF Asia Pacific director Yusuke Horiguchi said that the government must continue with its economic reform program including accelerating the sale of assets under the Indonesian Bank Restructuring Agency (IBRA).

Rizal said that the government was committed to accelerate the asset sale program.

He pointed out that the plan to replace IBRA chairman Cacuk Sudarijanto was aimed at accelerating the sale of IBRA assets and the restructuring of the corporate sector.

Finance Minister Prijadi Praptosuhardjo said earlier on Monday that Cacuk would be replaced this week.

Elsewhere, Rizal said that several former bank owners had indicated to him their willingness to surrender additional assets and their personal guarantee to repay their debt to the government.

Rizal declined to name the bank owners, but promised that when the time comes he would announce it.

Several business tycoons had agreed last year to surrender several assets to repay their bank debts to the government. But it turned out that the value of the assets they pledged were not sufficient to cover their obligation. The current economic team has demanded the business tycoons inject additional assets. (rei)