Jakarta, May 26 (Antara) - The Indonesian government, through the Finance Ministry and the central bank (Bank Indonesia/BI), will do its best to stabilize the rupiah, which has from early this year continued to weaken, reaching Rp14,200 per US dollar.
Based on data from the central bank, the rupiah had lost much of its value, weakening 4.53 percent until May 21, 2018 (year to date), hitting the lowest level since 2015.
Finance Minister Sri Mulyani Indrawati promised that the government will work together with BI to overcome the weakening of the rupiah against the US dollar.
"The government, together with BI, will continue to maintain the economic stability and maintain our rupiah currency," she stated in Sukoharjo District, Central Java, on Saturday.
She noted that several strategies have been undertaken by BI to stabilize the rupiah exchange rate, one of which is by raising its benchmark interest rate.
"This step is expected to strengthen the rupiah against the US dollar, while the government will maintain the state budget discipline," she added.
BI has raised its benchmark interest 7-Day Reverse Repo Rate by 25 basis points to 4.5 percent, hoping to prop up the currency.
According to her, all parties must minimize the turmoil, so that the entire economy goes with less risk. Previously, the rupiah was still fluctuating against the US dollar at the level of Rp14.1 thousand per US dollar.
It reached Rp14,202 on Thursday's opening at the Jakarta Interbank Spot Dollar Rate, or weakened 15 points from Wednesday's closing rate at Rp14,187 per US dollar.
This figure exceeds the government assumption, which was set at Rp13.4 thousand per US dollar in the State Budget (APBN) 2018.
"The implication of the dollar's appreciation is huge. If the value of the dollar is already over Rp14 thousand, it will affect the state budget as the assumption of the dollar in the state budget is set at Rp13.4 thousand. There is a big difference of about Rp600, and so it must be discussed at a meeting on the 2018 revised budget (APBNP)," Member of Commission XI of the House of Representatives (DPR), G. Michael Jeno, noted on Wednesday (May 16).
According to Sri Mulyani, the main factor causing the weakening of the rupiah is the economic policy of the US government and the US central bank over improving employment and inflation data in the United States.
In the face of rupiah weakening, BI finally decided to raise its benchmark interest 7-Day Reverse Repo Rate by 25 basis to 4.50 percent at its Board of Governors Meeting held on May 16 and 17, 2018.
However, the increase decided in the regular monthly meeting of the Central Bank's Board of Governors on May 16 and 17, 2018, has not been effective enough. The rupiah continued to lose more value as indicated in Thursday's opening, which reached Rp14,202 per US dollar.
Economists have suggested that the central bank should raise the benchmark interest rate by at least 50 basis points.
In the beginning, BI tried to save the rupiah by going to the market, spending some of its foreign exchange reserve to buy rupiah. The move drew criticisms from economists, who stated that the Central Bank should not rely only on the strength of its foreign exchange reserve.
BI is expected to raise its benchmark interest rate by another 25 basis points in its next monthly meeting in June.
Then, outgoing BI Governor, Agus Martowardojo, remarked that the policy is part of BI's policy mix to maintain macroeconomic stability and financial system amid global market uncertainty and global liquidity decline.
Martowardojo was succeeded by Perry Warjiyo as the governor of Bank Indonesia on Thursday (May 24). Warjiyo stated that he would intervene in the market and take early measures to maintain stability, amid the weakening of the rupiah.
After taking oath at the Supreme Court's Building in Jakarta, on Thursday, the new governor reaffirmed his commitment to seek stronger monetary measures in order to anticipate external pressures.
"Our top priorities are to launch pre-emptive, front-loading, and ahead-of-the-curve measures to maintain the interest rate," Warjiyo, who previously served as the Central Bank's deputy governor, revealed.
Besides early policies, Warjiyo is also seeking to intervene in the foreign exchange and government's debt papers (SBN) markets. "The interventions are aimed at maintaining stability of the rupiah exchange rate in the market," he stressed.
Warjiyo admitted that BI's prediction on the US Treasure obligations was by 2.7 percent, while this year, the figure has reached three percent.
Hence, in order to ease its weakening and ensure the liquidity of the rupiah, as well as foreign exchange, the new BI governor has planned to deepen the capital market.
From January to May, the BI has allocated Rp50 trillion in the SBN market. This measure is aimed at easing the tension that is triggered by capital outflow.
"Besides these actions, I will contact our counterparts at the Financial Services Authority (OJK) and the banks to clarify the false perception (about our economy's current state)," he noted.
In the meantime, Coordinating Minister for Economy, Darmin Nasution, dismissed suggestions describing Indonesian economy as nearing crisis, saying that the falling value of rupiah does not necessarily signal emergency.
"Our present situation is as if we are about to plunge into crisis is out of proportion. The shrinking rupiah value against the US dollar would not drive us to the brink of crisis," Nasution affirmed, after the ceremony installing Warjiyo, on Thursday.
He pointed out that the economic crisis happens when the domestic real sector is jolted by the impact on the monetary sector.***3***(A014/INE)EDITED BY INE(T.A014/A/BESSR/A. Abdussalam) 26-05-2018 20:34: |
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