Rupiah depreciation unlikely to affect business: Minister

Rupiah depreciation unlikely to affect business: Minister

Rendi A. Witular and Urip Hudiono, The Jakarta Post, Jakarta

The sharp depreciation of the Indonesian rupiah against the U.S.
dollar is unlikely to affect the country's business sector much
as the main driver behind the depreciation was external in the
form of the recently high demand for dollar-denominated assets.

Coordinating Minister for the Economy Aburizal Bakrie said on
Wednesday that the government was therefore closely cooperating
with Bank Indonesia (BI) to help ease the pressure on the rupiah,
as well as stabilize the country's overall macroeconomic
indicators.

"To some extent, the rupiah's decline is not worrisome for the
government or the business community as the causes of the
pressure are external," he said.

Aburizal said there was a high demand from global investors
for dollar-denominated assets at the moment following the U.S
Federal Reserve's recent decision to raise its benchmark interest
rates to stabilize the country's monetary situation.

He added the greenback's recent strengthening was a temporary
phenomenon and that the government and BI would wait for the
pressure to ease before taking any steps to help stabilize the
rupiah.

"It is not the rate that we are concerned about. As long as
the fluctuations are not sharp, they will be comfortable enough
for us," he said, adding that the government expected the rupiah
to strengthen after it received the proceeds from the recent sale
of dollar-denominated bonds worth some $1 billion.

At the market, the rupiah continued its week-long slump,
closing to a new low of Rp 9,613 per dollar, from Rp 9,575 the
previous day.

Analysts said a continuing slide was inevitable as long as the
demand for dollars from corporations to service their debts and
import needs continued to exceed the supply of dollars from
investments and export revenues.

Bank Buana director Pardi Kendy concurred with Aburizal,
pointing to the possibility that local investors were moving
their funds into more attractive dollar-denominated investments.

Analyst Khalil Rowter, however, disagreed with Aburizal's
belief that the rupiah's depreciation would not affect the
business community.

"It might have started as a microeconomic issue in the market,
but it could develop into a bigger macroeconomic problem," he
said, adding that the government and BI should quickly coordinate
the purchase of dollars with the corporate sector.

BI raised its benchmark interest rate to 7.70 percent on
Wednesday, up from 7.53 percent previously, which managed to
absorb some Rp 46.07 trillion of liquidity from the market.

Analyst Farial Anwar said the central bank's measures were too
late to suppress either inflation or the rupiah's volatility, and
called them "reactive".

"They should have been more pro-active, starting to take
action at the time the government increased fuel prices a month
ago."