Financial Counsellor and Director of the Monetary and Capital Markets Department of The International Monetary Fund (IMF) Tobias Adrian, stated that the international currency exchange rate including the rupiah are under pressure due to the strengthening of the United States Dollar. In his presentation of the Global Financial Stability Report in Nusa Dua Bali, nevertheles, according to Tobias, the Indonesian government could overcome it by opening the door to wider foreign investment to enter Indonesia. In addition, according to him, the Central Bank of Indonesia or Bank Indonesia can also take intervention steps to ensure that liquidity remains stable.
"So because there’s current account deficit Indonesia has to fund itself externally from international investors that is why an exchange of depreciation can be a shock absorber. And that is a good thing in our advise. Now of course the central bank of Indonesia has also intervene in foreign exchange market in order to make sure that liquidity condition in the market orderly and that is also very much consistent with the IMF advise on how to stabilize market financial conditions.
The Global Financial Stability Report (GFSR) in October 2018 found that global short-term risks to financial stability have increased, reflecting increasing pressure in developing countries and rising trade tensions. According to Tobias, this risk, although still moderate, can increase significantly. Intensification of concerns about emerging markets, a wider increase in trade tensions, the realization of political and policy uncertainty, or faster than expected tightening in monetary normalization, can lead to sharp tightening in financial conditions. This, according to Tobias, increases the urgency for policy makers to increase efforts to improve the resilience of the financial system by completing the financial regulatory reform agenda and developing macroprudential policy tools. (VOI/Ndy/Trans NUKE/AHM)