REPUBLIKA.CO.ID, JAKARTA  - Rumors that the Federal Reserve will normalize its monetary policy have worried market agents and put the rupiah under pressure, Indonesian Finance Minister Chatib Basri said.

"I think the issue no longer deals with the current account but the Fed's plan to normalize its policy," he said Thursday.

Five fragile emerging economies including Indonesia face the risk of the Fed's plan to normalize its monetary policy which has the potential to cause the flight of capital from developing nations, he said.

Volatility will most likely occur in Indonesia which has recorded a drastic increase in capital inflows after investors saw Indonesia as a developing nation with political stability and good economic fundamentals, he said.

"If capital inflows are high, the return risks will increasingly be greater. But if (foreign holding) in a portfolio is not large, the capital flights will be small," he said.

Indonesia, where 37 percent of bonds are owned by foreign investors, must make an effort to curb capital inflows and prevent the rupiah from fluctuating while responding to market agents, he said.

Therefore, to ensure Indonesia does not depend too much on foreign capital, the country should find new financing sources or diversify its financing sources by giving priority to the issuance of rupiah-denominated bonds, he said.

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