Rupiah devaluation not needed

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