Tax amnesty may take rupiah to below 10,000/US$

JAKARTA. The rupiah may strengthen beyond 10,000 per US dollar, far from the current level of around 13,000, assuming that the tax amnesty program succeeds in repatriating the targeted Rp 1 quadrillion (US$76.5 billion) of Indonesians’ offshore assets, an analyst says.

Reaching the target, which is equal to two third of the central bank’s current foreign reserve assets, would clearly constitute a massive inflow because the repatriated dollar assets would have to be exchanged into rupiah, said NG Korindo Securities Head of Research Reza Priyambada.

“If all the multi-billion dollar repatriated assets are converted into rupiah, based on a general estimation of its value, the rupiah will significantly appreciate against the US dollar to below 10,000,” he said in an economic discussion in Bali on Saturday.

Mandiri Sekuritas economist Leo Putera Rinaldy, however, worried that the steep appreciation in the rupiah exchange due to massive inflows of the repatriated assets might harm the economy.

“Indonesia needs a stable currency, as Bank Indonesia has previously highlighted. I believe the tax amnesty’s effect on rupiah appreciation will be limited as the central bank will prevent  volatile movement in the currency,” he said.

Both Reza and Leo warned that the multi-billion inflows might lead to over-liquidity in financial markets, thus the government and Financial Service Authority must prepare instruments to absorb the assets and effectively disburse them into real sectors. (Arif Gunawan Sulistiyono)