Strengthening of the rupiah

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