The fall of rupiah & bad timing of statements
Rupiah lost its value against greenback by almost 8% in just one week, from 8,700 to 9,400, partly due to bad timing of statements delivered by high-level government officers.
Initially rupiah dropped on bad sentiment over stock market and increasing oil price. Early this week the newly appointed director general for tax Darmin Nasution told parliament members that it would be difficult to collect tax at the amount set in the 2006 budget. This statement then raised concern of fiscal sustainability as tax is the single major source of state income.
The following day, thousands miles away from the parliament building, president Susilo Bambang Yudhoyono addressed a crowd in Lombok Island, West Nusa Tenggara that Indonesia would accelerate debt payment of US$7.8 billion to International Monetary Fund (IMF) so in two years, ahead of its maturity in 2010.
Politically, the president might gain something out of the statement. But then those who understand how the economy works started to raise another questions: How big is our reserves to support the payment and what might be the impact to supply-demand of the dollar? How much penalty Indonesia should pay due to the acceleration of payment? Economist Iman Sugema argued it will save US$800 million if Indonesia pay IMF loans early. But rupiah dropped even further.
Indonesia's foreign exchange reserves stood at US$43 billion as of April 2006. If Sugema was right with the total saving of US$800 million for an early payment,then it would be good for people, at least we could build more schools and hospitals. But I think the timing of the statement wasn't right.
READ MORE!!!
Initially rupiah dropped on bad sentiment over stock market and increasing oil price. Early this week the newly appointed director general for tax Darmin Nasution told parliament members that it would be difficult to collect tax at the amount set in the 2006 budget. This statement then raised concern of fiscal sustainability as tax is the single major source of state income.
The following day, thousands miles away from the parliament building, president Susilo Bambang Yudhoyono addressed a crowd in Lombok Island, West Nusa Tenggara that Indonesia would accelerate debt payment of US$7.8 billion to International Monetary Fund (IMF) so in two years, ahead of its maturity in 2010.
Politically, the president might gain something out of the statement. But then those who understand how the economy works started to raise another questions: How big is our reserves to support the payment and what might be the impact to supply-demand of the dollar? How much penalty Indonesia should pay due to the acceleration of payment? Economist Iman Sugema argued it will save US$800 million if Indonesia pay IMF loans early. But rupiah dropped even further.
Indonesia's foreign exchange reserves stood at US$43 billion as of April 2006. If Sugema was right with the total saving of US$800 million for an early payment,then it would be good for people, at least we could build more schools and hospitals. But I think the timing of the statement wasn't right.
READ MORE!!!
posted by yosef at 8:31 AM
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