Bank Indonesia on Alert for Possible Capital Outflow

Jakarta (Antara Bali) - Bank Indonesia is on alert for possible capital outflow, expected to occur in the second quarter if the countrys economic fundamentals continue to weaken, Governor of Bank Indonesia Agus Martowadojo said.

"There was capital inflow throughout 2014 amounting to Rp181 trillion. However, there is no guarantee that it will continue. If our economic fundamentals continue to weaken, we could lose money," he explained at a seminar here on Thursday.

Martowadojo stated that total capital inflow into the country from January to May 2015 reached Rp43 trillion and that it can flow out if Indonesias current account deficit continued to widen and the inflation rate continued to surge.

"The Rp43 trillion that flowed into the country from January to May was from the sale of state bonds, shares or Bank Indonesia certificates. There is risk of losing this if our inflation rate stays high and the current account deficit continues to widen," he noted.

According to the governor of the central bank, if the condition continued to drag on, it could create vulnerabilities in the domestic economy as a whole. "In the last three years, we suffered substantial current account deficit," he added.

The primary trigger of the upward trend in the current account deficit was the drop in exports and rise in imports, Martowadojo pointed out. "It means our need for the U. S. dollar will increase," he affirmed.

In view of that, he hopes private and state-owned companies immediately hedge their U.S. dollar-denominated debts. "If they do, the state or companies could expand," he said. (WDY)