Rupiah ideal at Rp 7,000-8,000 range: Ginandjar

Rupiah ideal at Rp 7,000-8,000 range: Ginandjar

JAKARTA (JP): Coordinating Minister for Economy, Finance and
Industry Ginandjar Kartasasmita said on Wednesday the favorable
equilibrium level for the rupiah should be at a range of between
Rp 7,000 and Rp 8,000 to the U.S. dollar in order to maintain the
country's export competitiveness in the region.

Ginandjar said that because other currencies in the region had
also depreciated by between 35 percent and 40 percent during the
past year, a very sharp appreciation in the rupiah would be
harmful to the competitiveness of the country's export products.

"I personally expect the rupiah will not strengthen to below
the Rp 5,000 level because it will hurt our exports," he told the
press after opening a seminar on investment and business
prospects in post-crisis Indonesia.

"I think Rp 7,000 to Rp 8,000 is the best equilibrium level
for now," he added.

The rupiah has been advancing significantly during the past
couple of weeks, touching the Rp 7,000 level at one point during
the Wednesday trading session. The rupiah fell back to 7,400
before closing at 7,150 against the U.S. dollar on Wednesday
afternoon, compared to Tuesday's close of 7,700.

The currency, which plunged to its lowest level of 17,000
against the greenback in January, was hovering at a range between
Rp 10,000 and Rp 11,000 last month.

"The rupiah appreciation has been the fastest compared with
other currencies in the region. We have to consider the impact
of this (on exports)," Ginandjar said.

The export sector is seen as a key to the country's recovery
from its worst economic crisis in three decades. The government
said in its new letter of intent to the International Monetary
Fund (IMF) that the priority for economic policy now was to
foster a recovery in output.

It also said that the rupiah depreciation had helped non-oil
and gas export volumes to expand strongly in the second and third
quarter period, although the export value only showed a moderate
increase due to weak commodity prices in the international
market.

Ginandjar also said that if the rupiah could maintain its
strength, the government might continue to gradually lower
interest rates, which are currently considered as the highest in
the region despite the recent 10 percentage point reduction.

Asked if the government would revise the 1998/1999 state
budget amid the strengthening of the rupiah, "There's no need for
a revision," he said.

The government has assumed an exchange rate of Rp 10,600 to
the dollar in the current budget, ending in March next year.

Ginandjar said that the strengthening of the rupiah was due to
increasing confidence in the country, in addition to the
weakening of the U.S. greenback against the yen.

He explained that the credibility of the government economic
reform programs played a dominant role in the improving
confidence in the rupiah, pointing out that the currency
appreciated by 40 percent from its level in July, while the yen
appreciated by 17 percent and other currencies by an average of 7
percent. (rei)