Jakarta, February 23: Indonesia's finance minister said on Monday the final decision on whether to implement a controversial fixed exchange rate system rested with president Suharto.``The president will decide when the currency board system will be implemented,'' Mar'IE Muhammad told a parliamentary budget committee hearing.``It's the right of the president to decide. When (he will decide) I don't know...let us wait,'' Mar'IE added.
The 76-year-old president is still pondering whether to implement a currency board as a means of reviving the strength of the ailing rupiah.
The collapse of the rupiah by over 70 per cent against the dollar since last July has caused prices and unemployment to shoot up, forced many Indonesian companies into technical bankruptcy and brought trade almost to a standstill.
Police in central Jakarta on Monday arrested three women leading a demonstration of about 50 people against the rising price of milk.
The government has banned street protests and other gatherings for aweek before and after the March 1-11 meeting of the People's Constituent Assembly (MPR), which is set to re-elect Suharto and approve state policy for the next five years.
Indonesia has been hit by violent protests against rising prices over the past few weeks as the nation of 200 million people grapples with its worst economic crisis in decades.
Riots have broken out in about two dozen towns and scores of shops looted and burned. Five people have been reported killed by security authorities in containing the disturbances.
Mar'IE, saying Suharto would decide on whether or not to adopt a currency board, told the parliamentary committee: ``Whether it is before the MPR meeting or after the MPR meeting, I honestly do not know. That is the truth.``The president has not made any other decision since he instructed parliament and the finance ministry to prepare for a currency board system.''
He added that if implemented, the currency board would have to be a credible operation or it would collapse. He alsosaid the government would honour all its foreign and local commitments even if such a system were put in place.The plan has met stiff opposition from leading Western governments, including the United States, and the IMF. They have suggested that Indonesia first complete implementing a package of financial reforms before turning to other measures.
Mar'IE's comments contradicted remarks by US treasury secretary Robert Rubin in London on Sunday, who said he had seen unconfirmed reports that Indonesia had dropped or deferred the currency board plan.
``The only thing I've seen is a published report that they have either deferred or cancelled the currency board,'' Rubin told reporters at the conclusion of a two-day meeting of finance ministers and central bankers from the Group of Seven (G7) top industrial nations.
``We think that is a constructive step,'' he said, adding that it was vital for Indonesia to follow through on a tough reform programme prescribed by the IMF to get the country's ravaged economyback on its feet.
Confusion on what steps Indonesia would ultimately take weakened the rupiah in early trade as dealers worried that the country may be on a confrontation path with major Western powers.
The rupiah fell to a low of 9,400 to the dollar from an open of 8,700/9200 and was last quoted at 8,900/9,400 at midday.
Dealers said trading died down after Mar'IE's comments as players took to the sidelines because of the confusion.
``I don't know what to do now,'' said one dealer at a European bank in the city.
The stock market index rose almost two per cent to about 504 points by the midsession as the weaker rupiah opened up arbitrage opportunities in index-heavy stocks which are also listed in London and New York. (Reuters)The currency board plan would fix the rupiah to a single rate against a major world currency. Supporters of the plan have said the rupiah could be fixed at a rate of 5,500 to the dollar.
Mar'IE however cautioned against any speculation on this score.
``As we know that therate would be fixed at a lower rate than present, this can lead people to sell dollars now and buy back later at a cheaper rate,'' he said. ``We have to be careful.''
(Reuters)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
