The rupiah under pressure

The weakening of the rupiah against the U.S. dollar in the last few days has been discussed widely. This is because over the past weeks the currency had shown itself to be quite capable of holding its ground against the greenback. People had begun to believe the rupiah would stabilize below the Rp 8,500 per dollar level.

Maintaining a stable currency is no easy task. This holds especially true for a currency like the rupiah, which has no real support aside from the government's signaled commitment to fix the economy.

Malaysian Prime Minister Mahathir Mohammad's manner of preventing speculation has seen no success so far. In its efforts to defeat the crisis, Kuala Lumpur smartly rejected aid offers from the IMF and the World Bank. Malaysia imposed controls on its currency instead and the Malaysian ringgit escaped speculator action.

Indonesia cannot follow that example as the country is already committed to both the IMF and the World Bank. Furthermore, many parties in this country either have an interest in supporting a free market policy, or the concept appeals to them on academic grounds.

Bank Indonesia had planned to monitor foreign exchange movement last month, but the plan had to be suspended as the draft law regulating the procedure has not yet been submitted to legislators. Such a monitoring system would at the very least provide better information to the monetary authorities.

-- Bisnis Indonesia, Jakarta