Rupiah devaluation not needed

Much apprehension has been created in the past few days by maneuvers made by foreign exchange speculators. After having upset the Thai, Philippine and Malaysian currencies those speculators have also tried to pressure our monetary system. As a consequence, the Thai baht and Philippine peso had to be devalued, although in de facto terms only. As for the Malaysian ringgit, its rate dropped sharply, although not enough to call for a devaluation.

It has been a relief to see that the same did not occur in Indonesia. This was due to the preventive measures taken by the Indonesian monetary authority, led by Bank Indonesia Governor Soedradjad Djiwandono and Finance Minister Mar'ie Muhammad.

Another factor that enabled the rupiah to withstand the pressure is the fact that the Indonesian economy is fundamentally sound. Our export growth, although slowing down, has been positive. Our trade balance shows a surplus of six percent to seven percent. Our foreign exchange reserves total US$23 billion, including $2 billion in standby loans, which is enough to pay for our imports for the next five and a half months. In other words, Indonesia was better prepared than its neighbors to anticipate the speculators' attacks.

A currency devaluation is not the best cure in this case, although it might offer a swift way to overcome the problem. The problem is that a devaluation always brings more problems in the form of price increases and rising inflation. This would certainly be no proper way to anticipate speculators' actions.

-- Republika, Jakarta