Economic Growth, Government Immediately Make Efforts to Strengthen the Rupiah
Jakarta - There are many reports about people's concerns regarding the weakening of the rupiah exchange rate against the US dollar. Bank Indonesia Governor Perry Warjiyo said that the rupiah exchange rate is currently below its fair value or undervalued.
This was conveyed by Perry at a press conference held at the Presidential Palace Complex after attending a meeting with President Prabowo Subianto, Jakarta, Tuesday, May 5. According to Perry, this belief is supported by a number of indicators. Economic growth is said to have reached 5.61 percent, low inflation, high credit growth, and strong foreign exchange reserves.
Perry explained that the pressure on the rupiah in the short term mainly came from global and seasonal factors. From a global perspective, the pressure comes from high oil prices, the rise in US interest rates, the US Treasury 10-year yield reaching 4.47 percent, and the strengthening of the US dollar.
In addition, there was a capital flight from emerging markets, including Indonesia. On a seasonal basis, Perry said that demand for dollars usually increases in April, May, and June. These needs include repatriation of dividends, debt payments, and Hajj requirements.
Even so, Perry emphasized that BI's position had not changed. The rupiah was considered too cheap compared to Indonesia's economic fundamentals. A number of strategies were designed by the government to strengthen the rupiah. One of the things discussed in a limited meeting (ratas) with President Prabowo, Bank Indonesia is ready to set a new limit for the purchase of American dollars up to a transaction of 25 thousand US dollars that must be underlying. The previous limit has been lowered from 100 thousand US dollars to 50 thousand US dollars per person per month. The rules on transactions of 25 thousand US dollars have not been announced when they will be enforced.
With this rule, the purchase of dollars at the limit must be accompanied by underlying transactions. Underlying is the basis of clear needs, such as import payments, foreign debt, dividends, or other needs that can be proven by documents. Perry said BI will also continue to intervene in the domestic cash market, DNDF, as well as NDF in foreign markets, including Hong Kong, Singapore, London, and New York.
According to Perry, BI's foreign exchange reserves are sufficient to maintain the stabilization of the rupiah exchange rate. In addition, BI strengthens supervision of banks and corporations that have high dollar purchase activities. Supervision is carried out together with the OJK to ensure that the stability of the financial system is maintained.