Ramli: Rupiah will gain if tension eases
JAKARTA, Indonesia - Indonesia's battered rupiah will gain value against the greenback if political tension in the country eases, Jakarta's senior economics minister Rizal Ramli says.
He said a reasonable value for the Indonesian currency is 9,000 rupiah to the U.S. dollar.
The Indonesian currency, which plunged to a two-year low in March, is now hovering around 10,400 rupiah.
The government originally had put the rupiah's value at around 8,000 to the dollar, Ramli told CNN.
"However, because of the slowdown in the world and the U.S. economy, the value of 9,000 rupiah is reasonable at this time."
Analysts said the currency's recent dip was triggered by uncertainties over the agreement with the International Monetary Fund and the bloody clashes in Central Kalimantan, which began in mid-February and left around 500 people died.
Currency stabilization 'easily done'
Ramli is upbeat that the rupiah's value can be stabilized, pointing out that the volume of foreign exchange trades now is well below that just before the 1997-98 currency crisis.
"Before the crisis, around $3 or 4 billion was traded per day. Right now, it is only about $100 million per day. Because of the small transaction, the stabilization can be easily done," the coordinating minister of economic affairs said.
The government is also helping the central Bank of Indonesia to shore up the rupiah's value by scheduling state enterprises' demand for dollars and asking the Indonesian Bank Restructuring Agency to convert its dollar revenues to rupiah.
However, Ramli warned that everything depends on the political situation in the country.
Economic indicators are good
"If the political competition, which has gone far now, can be lessened, I am optimistic the rupiah can strengthen faster," Ramli said. "The prime reason for the weak rupiah is politics."
"The (economic) indicators influencing the rupiah's value, such as exports and a current account surplus, are good and can support the rupiah's recovery. Only the perception is negative."
President Abdurrahman Wahid has been repeatedly criticized by opposition lawmakers over his erratic behavior and unpredictable leadership.
In February, the House of Representatives censured him for alleged involvement in two financial scandals, a move that could pave the way to impeachment.
His government is also under scrutiny from foreign donors after the International Monetary Fund disagreed with Wahid's reform policies and consequently delayed the disbursement of a $400 million loan to Jakarta.
IMF team due in Jakarta soon
"The disagreement is over," said Ramli, who flew to Washington in February to negotiate with IMF officials.
Although Indonesia is not in desperate need of IMF loans, delays in the lending can hold up loans from other creditors and stall the rescheduling of debt through the Paris Club. This would have serious implications for the budget, according to the Brussels-based International Crisis Group.
Sources said an IMF team will visit Jakarta as early as next week to do a review and decide on an agreement with the government.
Ramli said the proposed amendment of the central bank law -- seen to be the only stumbling block between Jakarta and the IMF - will not be included in the upcoming review.
Four central bankers -- two from Indonesia and two from overseas, appointed by Jakarta and the Fund -- are to start work this week studying the controversial proposed amendment, which the IMF said could jeopardize the independence of the central bank.
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