Strengthening of the rupiah

Head of the World Bank's representative office in Indonesia, Mark Baird, has said that the strengthening of the rupiah in the last few weeks is an indication of the restoration of market confidence. This rupiah strengthening evidently shows that the government is now better in managing the economy.

For some groups, an example being exporters, the strengthening of rupiah, which has taken place relatively quickly, has raised fear. For them, the strengthening rupiah will not only entail an adverse risk to their business but also lead to a weakening competitiveness in the global market. On the other hand, there are quite a few people that raise the question whether this recent strengthening of the rupiah is purely the result of market mechanism or the outcome of the government's manipulations through the intervention of Bank Indonesia as the central bank.

Rupiah strengthening has also provided maneuvering room to the central bank to ease its monetary policies so that the rate of interest may be expected to go down. One evidence in this respect is that the tendency of loans and Bank Indonesia promissory notes (SBI) interest rates have declined.

It must be kept in mind, though, that to the majority of the public, their greatest hope does not lie merely in the improvement of these macroeconomic indicators. The people have, for a very long time, been longing to see the revival of economic activities, which, in the last five years of the crisis that has swept the entire country, have considerably shrunk. In other words, improved macroeconomic indicators will not mean much unless sectors directly related to the public's economic activities are re-ordered.

-- Neraca, Jakarta