TEMPO.CO, Jakarta - Bank Indonesia (BI) continues to implement measures to curb the rupiah depreciation and stabilize the currency. To find out more about BI's plan, Tempo interviewed the central bank's deputy governor Dody Budi Waluyo. Excerpts:
One of the biggest fears over the rupiah correction is its impact on inflation. Is BI monitoring this?
The rupiah depreciation has not given significant pressure to inflation—as market players are confident of BI's efforts to stay in the market; maintaining the rupiah's stability within its fundamental limits. This is also reflected by Fitch's ratings yesterday, affirming that Indonesia still has an investment grade status.
What efforts of stabilization have BI done?
We continue to carry out exchange rate stabilization measures by combining multiple interventions in the forex and bond markets, rising interest rates, and ensuring that the rupiah's gradual depreciation is still within its fundamental values. BI also opened a forex swap auction for banks to help reduce pressure on the rupiah.
Why is the current account deficit (CAD) widening?
The CAD increase in quarter two was unavoidable—given the government's infrastructure projects that have to carry-on as planned. This is what causing an increase in capital goods import. Moreover, oil prices are also rising; so the value of oil and gas imports also increased. We have to keep in mind though that non-oil-gas exports growth was excellent—despite slower than imports'. To BI, this is a good deficit—as it is needed to maintain growth.
What is the solution to curb the CAD?
BI and the government are committed to the Presiden; to carry out tasks to promote exports and fast-track imports substitution programs. These tasks include accelerating the tourism sector as a 'quick win effort' for generating forex revenues. We project the CAD will remain within its safe limits until the end of 2018; which is below 3% of the GDP.