Rupiah intervention impact would be limited: Hashimoto
Rupiah intervention impact would be limited: Hashimoto
TOKYO (Agencies): Japan's Prime Minister Ryutaro Hashimoto said yesterday that intervention in the foreign exchange market would only have a limited impact in dealing with sudden fluctuations in Indonesia's rupiah and other Asian currencies.
Japan intervened to buy the rupiah in collaboration with Singapore last November to support the currency, but the impact was limited amid market speculation that Indonesia was not adhering to the economic program set by the International Monetary Fund (IMF), Hashimoto told an Upper House parliamentary committee.
Rather, it is necessary to support Indonesia and other Asian countries with structural reforms led by the IMF, Hashimoto said.
"There are limits to short-term intervention to deal with sudden market fluctuations. This is based on actual experience," he was quoted as saying by Reuters.
Meanwhile in Canberra the Australian government said yesterday Indonesia must engage in political reform and economic changes consistent with an International Monetary Fund package if the value of the rupiah is to recover.
Foreign Minister Alexander Downer said the only way for the Indonesian economy to become viable is for the value of the rupiah to rebound.
Downer told Parliament provision of more aid to Indonesia by Australia is under review, but said economic and political reforms are more important at this time.
"I don't think...the urgent need is so much additional funds.
The challenge for the Indonesian economy is to get the exchange rate back up from where it currently is to make the operation of the economy viable again," he said as reported by Dow Jones Newswires.
And that can only be achieved if first of all the political stability is achieved for a constructive program for political reform, and if there is a continuation of the difficult task of economic reform consistent with the IMF package," Downer added, referring to changes needed to boost the rupiah's value and make the economy viable.
The rupiah has fallen from around Rp 2,500 in mid-1997 to a low of near Rp 17,000 last week. it was trading at Rp 10,800 to U.S. dollar yesterday.
Australia has provided additional humanitarian aid of around A$50 million to Indonesia, both on a bilateral basis and through a food aid package coordinated by the World Bank.
It has also offered up to US$1 billion in standby credit under the US$43 billion IMF-led financial assistance package for Indonesia.
Downer rejected what he said are calls from the main opposition Labor Party for Australia to coordinate and support an Indonesian version of the Marshall Plan, which funded a rebuilding of Europe after World War II.