Sjahril says RI financial scene unfazed by riots

Sjahril says RI financial scene unfazed by riots

HONG KONG (Reuters): Riots and renewed political unrest in Indonesia have had little impact on the country's already battered financial scene, the governor of the central Bank Indonesia, Sjahril Sabirin, said on Tuesday.

While the incidents have sparked concern, people in financial circles tended to see them as isolated incidents and quite unlike the violent tumult in May that led to the end of President Soeharto's 32-year rule, Sjahril said.

"Of course there is concern...but so far the effect has been very minimal, if there is any. If you see the exchange rate, it has not really been moved by the riots," Sjahril told reporters.

Sjahril was in Hong Kong to address a business conference and during his stay, he was due to meet officials at the Hong Kong Monetary Authority and Indonesian bankers.

"People also see these as separate incidents, not really a major thing like what happened in May this year," he added.

A rash of violence has hit Indonesia in recent weeks as it grapples with economic and political crisis. About 30 people died in civil strife in November, most of them in clashes in the capital Jakarta.

In mid-May 1,200 people were killed and dozens of women raped, most of them ethnic Chinese.

Sjahril, who spoke during a speech at the conference of a need for Indonesia to strengthen its bankruptcy laws and build a strong and sound banking system, told reporters there was room for the Indonesian rupiah to strengthen further.

"There's room for it to strengthen further, to a level a little bit below 7,000 or 6,500 (per U.S. dollar)."

However Sjahril added that he was not "really pushing too hard to that direction".

He expected interest rates in Indonesia to move lower. "We expect the interest rate to decline further," he said.

"Without the lowering of interest rates, for the financial sector..., they will find it difficult to recover," Sjahril said.

While bankers in Indonesia have said they would be comfortable with a 40 percent interest rate, Sjahril said his ideal level would be lower.

"In a few months I think we should reach a level, if things stay at their current path, we should be able to reach 20, 30 percent or maybe lower than that," he said.

Indonesia would like to raise sovereign debt in the near term, but it would need to zero-in on an appropriate time.

"We would like to do so but the question is, what would be the appropriate time?" Sjahril said.

"Right now there is no urgent need for the republic to enter the market. But as time goes on, we may find it useful to gauge market perception of Indonesia," he said.