Govt to Curb Rupiah Correction
2 March 2015 13:06 WIB
TEMPO.CO, Jakarta - The government will anticipate the risks of the rupiah correction following their plan to boost infrastructure development in this year. "Infrastructure development will cause import surges and have the risk of disturbing the current account as well as the rupiah [exchange rate]," Bobby Hamzah Rufinus, deputy of fiscal and monetary at the Coordinating Ministry for the Economy, told Tempo last week.
For this year, government has allocated Rp290.3 trillion for infrastructure development, which is 20 percent of the State Budget's Rp1,984.1 trillion total.
Last week, the rupiah plummeted 101 points (0.79 percent) to 12,932 per US dollar after reaching its lowest level at 12,960. Bank Indonesia calls on Indonesia to prepare for depreciation as the greenback continues to strengthen with the US economy's improving economy.
Meanwhile, Gadjah Mada University economist Tony Prasetiantono predicted the rupiah will not exceed 13,000 per dollar and will return to normal levels at around Rp 12,700 per US dollar in the near future. His projection is based on the assumption that the Federal Reserve will not allow its exchange rate to continue appreciating, as it would reduce the competitiveness of the country's products.
"The Fed is still delaying the interest rate hike as well," he said.
Therefore, according to Tony the government does not need to hold back on infrastructure development despite the downside risks. Tony also suggests the central bank to keep the BI Rate at 7.5 percent. (*)