BI Official Admits Low Appreciation Of Rupiah's Value

Jakarta (Antara Bali) -- A senior official of the central bank of Indonesia admitted here on Wednesday that the depreciation that the rupiah has been experiencing has reached a level too low.

Senior Deputy Governor of Bank Indonesia Mirza Adityaswara said that the exchange rate of the rupiah had reached a level lower than its fundamental value due to both external and internal factors.

"If asked whether its depreciation is already below its value, then my answer will be yes. Our currency has depreciated too much," Adityaswara remarked.

He explained that the external factor that had caused the drop in the rupiah's value was the plan of the U. S. central bank, the Federal Reserve, to raise its interest rate. The monetary stimulus of 20 percent of the U. S. gross domestic product, or US$3.8 trillion, will be withdrawn slowly by the bank by the raising of its interest rate.

"Right now, the rate is 0.25 percent. In the next three years, it will be increased to 2.5 to 3.0 percent, while the European interest rate is negative, that of Japan is zero point something, and that of China is also down. The US economy is thriving alone," he pointed out.

Adityaswara added that in 1998, the exchange rate of the rupiah had dropped against those of all currencies, but now the U. S. dollar had risen against nearly all currencies of the world. Besides the improvement of the U. S. economy, the rupiah's depreciation was also caused by domestic factors, such as the demand for the greenback surpassing supply in Indonesia. (WDY)