BI sets to maintain economic stability amid growing pressure

BI also try to convince the market that Indonesian economic condition is strong.

REPUBLIKA.CO.ID, JAKARTA -- Bank Indonesia Governor Perry Warjiyo said the Central Bank is set to maintain economic stability despite disturbing pressure on the national currency rupiah. He said that Bank Indonesia to intensity the intervention, especially in the foreign exchange market.

Rupiah is feared to be under heavier pressure with the collapse of local currencies in growing number of countries such as lira in Turkey and peso in Argentina. Argentina is facing yet another mounting financial crisis, with the currency of Latin America's third largest economy plunging 45 percent against the US dollar as the nation struggles to prop-up the failing peso.

Perry said in addition to intensifying intervention, Bank Indonesia has purchased State Securities (SBN) from the secondary market. Bank Indonesia also opened auction for foreign exchange swap hoping to draw more than US$400 million in foreign exchange.

"That is what we have continued to do for stability. We also will continue close coordination with the Finance Ministry and the Financial Service Authority (OJK) to ensure financial system and exchange rate stability," Perry said here on Friday.

While doing intervention, the Central Bank also would try to convince the market that the Indonesian economic condition is strong. He asserted that the country's economic resilience has remained strong, both in economic growth and in inflation.

In August inflation is estimated to be around 0 percent, he added. Bank Indonesia is aware of the economic turbulence in Turkey and Argentina, he said, adding but Indonesia is not Turkey or Argentina.

The difference between Indonesia and other countries is the country strictly observes the principles of prudence in monetary and fiscal policy.

"What makes the difference greater is the strong commitment of the government under President Joko Widodo to immediately cutting the current account deficit (CAD)," he said, pointing to the regulation on the wider use of Biodisel 20 (B20) as motor vehicle fuel.

Wider use of Biodiesel, which is a mixture of palm oil (20 percent) and automotive diesel oil (80 percent) the government hopes to be able to significantly cut imports of oil fuel. Imports of oil including fuel oil have always caused the deficit or reduced surplus in the country's trade balance.

In addition, the government has intensified tourism promotion and shelved a number of projects not yet up to financial closing, he said. "Those are among the things that make Indonesia different from other countries notably Turkey and Argentina," he said.

He said the government has been prepared in facing worse impact of global financial turbulence. "We have strong economic resilience. Synergy between related agencies is strong and would be strengthened to reduce the CAD and to be consistent in prudential policy," Perry said.

Rupiah opened at the level of 14,630 per dollar on Friday morning or a loss of some point from earlier level.

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