ID :
27133
Tue, 10/28/2008 - 19:45
Auther :
Shortlink :
http://m.oananews.org//node/27133
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RUPIAH'S DEPRECIATION MOSTLY CAUSED BY EXTERNAL FACTORS : OBSERVER
Jakarta, Oct 28 (ANTARA) - About 70 percent of the factors that have caused the rupiah to depreciate originate overseas so that it is difficult to halt the weakening of the rupiah, a legislator said.
"It is difficult to offset the depreciation of the rupiah because about 70 percent of the causes came from overseas," Dradjad H. Wibowo, a member of Commission XI of the House of Representatives (DPR) which deals with financial affairs said here on Tuesday.
He said the government now only had a limited number of options if it wanted to maintain the rupiah's value at Rp10,000 per US dollar.
"There are only two options, namely an open market operation and an interest rate increase. If the first one is taken it will deplete the foreign currency reserves and Bank Indonesia will not be able to cope with the redemption waves," he said.
On the other hand, if the interest rate was raised, he said, it would trigger bad credits and mass worker lay-offs.
He said what the government should do now was to supervise banks and other financial institutions so that they would not use their foreign exchange reserves for speculative purposes.
"This must be tightly monitored on a day-to-day basis but this step will not be effective to stop the rupiah's depreciation unless the government has the courage to switch to a controlled foreign exchange regime, or fixed foreign exchange rate," Wibowo said.
In order to do this, he said, the government should carry out a major change, namely revise the laws and the economic system. A controlled foreign exchange regime could provide for full or limited control of foreign currency flows. A limited control regime, for example, would stipulate a period in which foreign currencies cannot be transfered abroad.
Malaysia, he said, had issued a regulation under which foreign currencies which had entered the country could not be transferred overseas again for at least one year.
However, he said, the adoption of a controlled currency regime would have the consequence that Indonesia could no longer obtain loans for project financing.
"It is difficult to offset the depreciation of the rupiah because about 70 percent of the causes came from overseas," Dradjad H. Wibowo, a member of Commission XI of the House of Representatives (DPR) which deals with financial affairs said here on Tuesday.
He said the government now only had a limited number of options if it wanted to maintain the rupiah's value at Rp10,000 per US dollar.
"There are only two options, namely an open market operation and an interest rate increase. If the first one is taken it will deplete the foreign currency reserves and Bank Indonesia will not be able to cope with the redemption waves," he said.
On the other hand, if the interest rate was raised, he said, it would trigger bad credits and mass worker lay-offs.
He said what the government should do now was to supervise banks and other financial institutions so that they would not use their foreign exchange reserves for speculative purposes.
"This must be tightly monitored on a day-to-day basis but this step will not be effective to stop the rupiah's depreciation unless the government has the courage to switch to a controlled foreign exchange regime, or fixed foreign exchange rate," Wibowo said.
In order to do this, he said, the government should carry out a major change, namely revise the laws and the economic system. A controlled foreign exchange regime could provide for full or limited control of foreign currency flows. A limited control regime, for example, would stipulate a period in which foreign currencies cannot be transfered abroad.
Malaysia, he said, had issued a regulation under which foreign currencies which had entered the country could not be transferred overseas again for at least one year.
However, he said, the adoption of a controlled currency regime would have the consequence that Indonesia could no longer obtain loans for project financing.
