Susilo steps in to ease panic over rupiah

Susilo steps in to ease panic over rupiah

Rendi A. Witular and Urip Hudiono, The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono made an impromptu visit to the
Jakarta Stock Exchange (JSX) on Wednesday to encourage the
business community to have confidence in the country's economy,
following a recent slump in local currency and stocks.

Speaking when closing the day's trading, Susilo urged the
business community not to panic in response to the rupiah's
recent slide against the dollar as the country's economy remained
strong.

"I would like to affirm the government's serious efforts in
addressing the currency woes. Don't panic because our foreign
exchange reserve is still sufficient and our underlying economy
is strong," he said.

According to Susilo, the country's overseas currency reserve
currently stands at some US$35 billion.

The rupiah continued its recovery to end higher by 1.2 percent
against the U.S. dollar on Wednesday to Rp 9,573 from Rp 9,688 on
Tuesday and from its three-year low of Rp 9,750 on Monday.

The extended recovery is supported by the central bank's
decision to unload its dollar reserves to prevent the local note
from diving further and to provide a number of new monetary
instruments aimed at preventing the rupiah from being speculated.

Tracking the recovery of the rupiah, the Jakarta stock market
also ended slightly higher. The Jakarta Composite Index closed up
0.450 points to 1032.218, with a transaction volume of 1.25
billion shares valued at Rp 1.4 trillion ($145 million).

Susilo said the government would work closely with Bank
Indonesia (BI) to ensure that the monetary condition remained
stable, with efforts from the government's side to control the
massive buying of dollars by a number of state enterprises.

"The government has instructed all state enterprises to
coordinate with BI before buying the greenback in a large amount
to prevent a shock in the market as well as to reduce speculation
activities," he said.

He acknowledged that one of the main culprits in contributing
to the decline in the rupiah was the uncontrollable massive
buying of dollars by state oil and gas company PT Pertamina aimed
at importing fuel for the domestic market.

State Minister of State Enterprises Sugiharto said the
government would from now on prohibit Pertamina from directly
buying dollars from the spot market to avoid volatility in the
rupiah and the triggering of speculation activities.

He said in the future Pertamina could only buy dollars from BI
after comprehensive coordination with the monetary authority and
his ministry.

"We are currently discussing with BI the technical procedures
for state enterprises in buying dollars," he said, adding that
Pertamina would need $50 million each day to finance the import
of fuel.

Sugiharto also said the ministry was still discussing with the
central bank the possibility of Pertamina directly acquiring its
foreign exchange revenue from the export of oil and gas.

The move is made to help maintain Pertamina's foreign currency
cash flow for importing fuel.

At present, Pertamina has to hand over its oil export revenue
directly to the central bank.

Susilo also voiced his optimism that the country's inflation
rate would remain on track this year because the recent high
inflation pressure was mainly a reaction to the fuel price
increase.

"Inflation is still under control. In the coming months, we
have estimated that inflationary pressure will ease and economic
growth will remain on track," he said.