BI to focus on guarding economic stability

JAKARTA. The Indonesian central bank will stay focused on maintaining and prioritizing macroeconomic stability to deal with the strengthening of the dollar against the Chinese yuan, an official said.

"What if the super dollar (phenomenon) takes place and the yuan weakens? We will continue to guard macroeconomic stability and ensure growth," Governor of Bank Indonesia (BI) Agus Martowardojo said here on Thursday (13/8).

Favorable coordination among government institutions such as Bank Indonesia, the Ministry of Finance, the Financial Services Authority, and the Deposit Insurance Agency, which are all members of the Financial System Stability Coordination Forum, is needed to maintain macroeconomic stability, he emphasized.

"We can overcome the pressure of the dollar if we have solid fundamentals. Our policies must be consistent and must synergize with those of other real sectors in a timely and measurable manner," he remarked.

In addition, the economy of the United States will continue to recover, although it will not be as previously projected. Statements from officials of the Federal Reserve also indicated that the U. S. interest rate will rise twice a year as estimated.

Moreover, Martowardojo pointed out that the Chinese government's policy to devaluate their currency was implemented to improve the country's export performance to be more competitive and to recover their eroding foreign exchange reserves.

The Bank Indonesia governor also projected that the devaluation of the yuan will continue in the future because it is still considered uncompetitive as compared to the South Korean won and a number of currencies of other countries in the region.

The impact of the devaluation of the yuan resulted in a drop in the rupiah's exchange rate. It nearly touched the level of Rp13,800 per U. S. dollar on Wednesday. The central bank assessed that the decline was too substantial (overshot).

"The rupiah has not reflected its fundamental value the last two days. Its depreciation is unacceptable as it overshot," he noted.

Furthermore, Martowardojo asserted that Bank Indonesia has been and will continue to be in the market to make efforts to stabilize the exchange rate.