Rupiah closing in on 11,000 mark against dollar

The rupiah plunged to near 11,000 per U.S. dollar late on Monday, the lowest level during President Megawati Soekarnoputri's three-month-old administration.

Bank Indonesia deputy governor Miranda Goeltom said that the pressure on the local unit was due to strong dollar demand from the corporate sector to repay foreign debt.

"Dollar demand for debt repayment is enormous," Miranda told reporters, pointing out that companies were buying the greenback for hedging purposes.

The rupiah closed at 10,940, down from 10,675 on Friday.

Miranda said that domestic and external uncertainties would continue to cloud the rupiah.

The local unit tumbled to around 11,000 before Megawati's predecessor Abdurrahman Wahid was dismissed by the People's Consultative Assembly due to incompetence.

The rupiah strengthened to around 8,200 following the election of Megawati late in July amid hopes of an improving political climate at home and growing confidence in the economy with the installment of a credible economics team.

The 2001 state budget assumes an average exchange rate of Rp 9,600 per dollar.

But recently there has been growing criticism that the Megawati administration has been progressing slowly in the implementation of key economic reform programs.

On Monday, the World Bank released a report ahead of a key Consultative Group on Indonesia (CGI) donors meeting this week criticizing the slow progress in key reform programs, including privatization and asset-sale programs.

"Official creditors are becoming increasingly wary of pledging support for policy reform when the track record gives little comfort," the Bank said.

Earlier, international rating agency Standard & Poor's cut the country's sovereign credit rating from CCC+ to CCC due to concern over debt rescheduling at next year's Paris Club meeting. --JP