ID :
18978
Thu, 09/11/2008 - 20:45
Auther :
Shortlink :
https://www.oananews.org//node/18978
The shortlink copeid
GOVT ADVISED TO CHANGE FOREX RESERVE MANAGEMENT SYSTEM
Jakarta, Sept 11 (ANTARA) - The Indonesian government should change its foreign exchange reserve management system to improve the country's competitive edge and productivity and enable it to withstand global economic turmoils, an economist said.
Executive Director of the Econit Economic Research Institute Henri Saparini was responding to the country's economic capability in the face of the looming economic slowdown in the United States and Europe and the rupiah's continuous weakening against the US dollar.
According to Bank Indonesia (BI), the country's foreign exchange reserves in the month ended on August 31, 2008 stood at US$58.4 billion, down nearly 2 percent from a month earlier.
The central bank said the government's efforts to stabilize the rupiah and repay debts and global pressure due to economic slowdown and accelerating inflation were responsible for the drop in the foreign exchange reserves.
Henri said the country's foreign exchange reserves did not reflect the real conditions because they were driven by hot money, particularly an inflow of foreign funds as a result of soaring commodity prices in the global market and proceeds from the issuance of state bonds.
"The government wants to prevent an outflow of the funds by raising the benchmark interest rate (BI Rate) to curb the stubbornly high inflation rates at the expense of the real sector's growth," he said.
Because of the higher lending rates, the business world must spend more on their operations and consequently, the real sector was growing at a slow pace, he said.
To cope with inflationary pressures, the government had since 2007 been using monetary approaches by raising the BI Rate. However, the inflation rates surpassed the target and could not be curbed, he said.
"To curb inflation, we can just control the prices of goods and services as well as the distribution of goods," he said.
He said the government's decision to raise fuel oil prices by an average of 27.8 percent last May was not popular because it had pushed up the inflation rate and slowed down industrial growth.
Executive Director of the Econit Economic Research Institute Henri Saparini was responding to the country's economic capability in the face of the looming economic slowdown in the United States and Europe and the rupiah's continuous weakening against the US dollar.
According to Bank Indonesia (BI), the country's foreign exchange reserves in the month ended on August 31, 2008 stood at US$58.4 billion, down nearly 2 percent from a month earlier.
The central bank said the government's efforts to stabilize the rupiah and repay debts and global pressure due to economic slowdown and accelerating inflation were responsible for the drop in the foreign exchange reserves.
Henri said the country's foreign exchange reserves did not reflect the real conditions because they were driven by hot money, particularly an inflow of foreign funds as a result of soaring commodity prices in the global market and proceeds from the issuance of state bonds.
"The government wants to prevent an outflow of the funds by raising the benchmark interest rate (BI Rate) to curb the stubbornly high inflation rates at the expense of the real sector's growth," he said.
Because of the higher lending rates, the business world must spend more on their operations and consequently, the real sector was growing at a slow pace, he said.
To cope with inflationary pressures, the government had since 2007 been using monetary approaches by raising the BI Rate. However, the inflation rates surpassed the target and could not be curbed, he said.
"To curb inflation, we can just control the prices of goods and services as well as the distribution of goods," he said.
He said the government's decision to raise fuel oil prices by an average of 27.8 percent last May was not popular because it had pushed up the inflation rate and slowed down industrial growth.
