BI caught off guard by recent rupiah decline

JAKARTA. Bank Indonesia (BI) deputy governor Mirza Adityaswara has said the rupiah exchange rate, which currently stands at below Rp 11,500 per US dollar, had been more volatile than expected.

“The rupiah has been overshooting our target, as it has fallen below Rp 11,500 per US dollar,” he said during a work visit to Gorontalo on Sunday, as quoted by Antara news agency.

Mirza said the rupiah exchange rate would be considered "appropriate" for the national economic condition if it stood at between Rp 11,000 and Rp 11,500 per US dollar.

“This level is suitable to straighten out problems in Indonesia’s balance of payments because the rupiah at such a level is strong enough to press down imports and make exports more competitive,” he said.

Mirza said increases in export values and declines in import values could trim down the country’s current-account deficit to 2.5 percent of GDP.

“The figure should be below 2.5 percent. We don’t expect a surplus. We just want to reduce the current-account deficit,” said Mirza.

Indonesia’s current-account deficit has declined to US$8.4 billion or 3.8 percent of GDP in the third quarter from $9.9 billion or 4.4 percent of GDP in the second quarter. The deficit is expected to decline to 3.5 percent of GDP by the end of this year.

Mirza said the currency rate volatility was a normal thing and the rupiah could strengthen to around Rp 11,000 per US dollar if problems in the country’s balance of payment could be resolved.