Rupiah is likely to remain stable in next two months
Rupiah is likely to remain stable in next two months
JAKARTA (JP): The rupiah will remain stable in the next two
months despite the flat growth of Indonesia's non-oil exports and
stronger inflationary pressure, a foreign bank executive
predicted yesterday.
Johannes Sjarif, the treasury relationship manager of the
Netherlands-based ABN-AMRO Bank, estimated that the rupiah's
depreciation against the U.S. dollar will reach less than five
percent for the whole 1994.
The estimated five percent is higher than last year's figure
of 3 percent, but Johannes said that his estimate is much lower
than the six to seven percent projected by economists early this
year.
The dollar has thus far already gained 3.5 percent since
January this year to Rp 2,183 from Rp 2,110 as of last December.
Johannes attributed the lower-than-estimated depreciation to
the healthy performance of the country's foreign exchange
reserves.
"The inflows of foreign currencies will continue growing in
line with the rise in foreign investment both in the industrial
sector and in the capital market," he told a seminar on trade
financing held by his bank.
Speakers at the seminar, which discussed the 1993 revision of
uniform customs, practice for documentary credits, the use of
letters of credit (L/C) in local trade and foreign exchange
dealings in Indonesia, included Walter Tan, the senior vice
president of ABN-AMRO Bank's branch in Singapore and Henk Mulder,
the vice president of the bank's Indonesian branch.
Investment
He said that the relaxation of the government's investment
policy would attract more foreign investors and that logically it
will, in return, boost the country's foreign exchange reserves.
According to Bank Indonesia (the central bank), the country's
official reserves as of August reached a manageable level of
US$12.35 billion, equivalent to the value of 4.85 months of non-
oil imports.
The rise in crude oil prices to between $18 and $19 per
barrel, as compared to the government's targeted price of $16 per
barrel, has significantly improved the balance of payments
projection so that the lower than estimated growth in non-oil
exports will not really deal a blow to the country's foreign
exchange reserves.
The country's non-oil exports dropped for the first time in
the first quarter of this year to US$1.61 billion, or 1.6 percent
lower than those in the corresponding period of last year, due
mainly to the drop in exports of textile-related products.
Non-oil exports recovered in June, rising by around 15 percent
to $2.7 billion from the same period of last year.
Johannes acknowledged that the inflation rate, which has
reached 7.38 percent in the first nine months of this year, may
further increase.
Economists estimate the inflation rate will surpass the
government's maximum limit of 10 percent due to the higher than
expected increase in prices of food and construction materials
and the government's decision to raise electricity tariffs
beginning next month.
Johannes estimated that the stronger inflationary pressure
will prompt commercial banks to raise their time-deposit rates to
between 14.5 and 15 percent per annum from between 12 and 13.5
percent at present.
"The higher interest rates will enable them to curb capital
flights as depositing rupiah in time deposits will still give
good returns," he said.
Johannes said that Bank Indonesia's recent move to widen the
spread (band) of the sale and buy rates of the rupiah against the
greenback to Rp 30 from Rp 20 will also discourage capital flight
as the band will give more risk to short-term speculators.(hen)