TEMPO.CO, Jakarta - On Thursday, March 5, the rupiah took a plunge to its lowest rate since 1998, closing at 13,022 per US dollar. As of last week, the rupiah was still swaying within that range.
This latest development has not caused Bank Indonesia (BI) governor Agus Martowardojo to panic. Instead, he is asking the public to remain calm and not worry about the rupiah correction, saying it would be temporary.
In his first interview with the media since becoming the central bank's governor, Agus told Tempo's Tomi Aryanto, Heru Triyono, and Artining Putri about some of the bank's monetary policies, especially in dealing with the weak rupiah.
The rupiah has penetrated its 13,000 per US dollar threshold. Did you see this coming?
[The exchange rate] is a reflection of Indonesia's economic fundamentals. But it doest mean that the rupiah will continue to fluctuate and create public distrust. It is Bank Indonesia's job to maintain the exchange rate volatility, so thatIndonesia's economy will improve.
What are the factors making the rupiah so weak?
America's improving economy, and on the other hand; China's is deteriorating. As for internal factors, we have an increasing debt and a deficit current account. The latter affects the rupiah's exchange rate. From March until June, the need for foreign exchange will increase as many investors will repatriate their profits and pay their debts. Those things have caused capital outflows as well.
What is Bank Indonesia's version of a safe exchange rate?
I cannot say exactly how much. But one thing for sure, BI still maintains a tight monetary policy to secure the economic stability from an array of global and domestic pressures. We need to remain cautious and refrain from applying a loose monetary policy.
How long will this correction last?
If we stay focused and we can strengthen our current account balance, by June the rupiah will be recover. I hope that from March to June the government will be able to prove that [investment] licensing is going well, and also electricity and energy reforms. That way we can have the public and investors' trust.
Is Indonesia's current situation the same as when we were hit by the 1997-1998 crisis, which had propelled the rate to Rp16,000 per US dollar?
Very different. At that time the rupiah was around Rp2,000-Rp3,000 per US dollar, and then jumped to Rp16,000 per US dollar. The depreciation rate was 350 percent in one year. In 2014 we experienced a correction of 1.8 percent, and this year so far it rose to 6.0 percent.
What would be the right thing to do?
We need to be cautious, but there is no need to worry because the correction is happening as we are patching up our current account deficit. Last year's deficit was US$26.2 billion, a decline from 2013's US$29.1 billion.
The government has issued six economic policies. How will it affect the rupiah?
We welcome those policies warmly. (*)
