Saturday, 12 May 2018 16:30

BI Still Has Second Line Defense for Rupiah

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Head of Center for Economics and Public Policy Studies of Gadjah Mada University  (UGM), Yogyakarta, Tony Prasetiantono Head of Center for Economics and Public Policy Studies of Gadjah Mada University (UGM), Yogyakarta, Tony Prasetiantono VOI-REZHA

The weakening of the rupiah against the US dollar which has penetrated the level of Rp 14,000 per US dollar must be carefully monitored by the government of Indonesia and Bank Indonesia -BI. The pressure is predicted to continue and will have a negative impact on the economic sector in Indonesia. Therefore, BI has set up some second line defense options for rupiah. One of the options that can be used is the Chiang Mai Initiative Multi-lateralization (CMIM), which is a multilateral currency exchange arrangement between ASEAN + 3 members. This was stated by Head of Center for Economics and Public Policy Studies of Gadjah Mada University  (UGM), Yogyakarta, Tony Prasetiantono in a recent discussion held by a private radio in Jakarta.

 “BI still has a second line defense; we have right to withdraw by three countries of East Asia, namely China plus Hongkong, Japan, and South Korea.  But, we have a question.  They are countries with a large foreign exchange reserve and Chiang Mai Initiative has been established since 2000. But, the initiative has never been activated. Because for 18 years, the ASEAN countries are fine, including in the 2008 crisis,” Tony Prasetiantono said.

However, Tony Prasetiantono also remarked that the injection of funds through the CMIM scheme to Indonesia will not necessarily have a positive impact on the Indonesian economy. He is worried that the market response will get worse after the funds totaling 240 billion US dollars are injected into Indonesia. Because, probably the market will assume that the funds are only entrusted to Indonesia in a short time. (VOI/Rezha/RHM)

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