Supplying Pertamina

With economic growth of over 6 percent and a budget deficit of (in the worst case) of only 1 percent in 2005, Indonesia's macroeconomic picture appears very good. I find the ongoing pressure on the currency, in view of the latter, difficult to understand. Further, Indonesia is less dependent on oil imports than all other Asian countries with the exception of Brunei. Yet the currencies of these other countries remain firm against the dollar.

Indonesia remains a net exporter on the energy account, including LNG, so the frequently aired view that it is oil imports which are pressuring the economy makes little sense. This assumes, of course, that all the dollar proceeds from energy exports are being repatriated. The central bank should be in a position to supply Pertamina directly with all the dollars it needs using the proceeds from energy exports.

The forex market in Indonesia, again without Pertamina's open market transactions, remains relatively small such that central bank intervention should be highly effective in maintaining a currency range, just as in Singapore for instance. Perhaps the missing ingredient is confidence, which requires effective communication with the markets from both the central bank and the government.

Alternatively, and more disturbingly, it would be of concern that undisclosed issues regarding the true situation of the currency account and currency repatriation are at play.

PHILIP TOWNSEND, Sanur, Denpasar