REPUBLIKA.CO.ID, JAKARTA -- Indonesia's Chief Economic Minister Sofyan Djalil reiterated here on Wednesday that the internal economic conditions were good and blamed external factors for the current depreciation of the rupiah.
"Not only the rupiah but all other currencies in the world are also depreciating against the US dollar," he remarked following a cabinet meeting at the state palace.
He said Indonesia's macroeconomic conditions were good, marked by low inflation, positive flow of foreign capital, stock market index hike, and lower yield of state bonds.
"All indications are good. Our economic management is also better, and our fiscal conditions are healthier because we are no longer held hostage by the price of oil," he affirmed.
He noted that Indonesia now follows a free exchange rate system in which the rupiah exchange rate is determined by market demand and offer.
"What is important is improving the economic conditions. It is no use for us to intervene in the market. It will be futile if the rupiah exchange rate will not strengthen despite intervention and may also drain our foreign exchange reserves. In view of that, what is important is improving our economic conditions," he explained.
He noted that the current depreciation of the rupiah was possibly caused by increasing demand for the US dollar to pay debts, dividends, interest, and others.
"So, it is only a matter of offer and demand," he emphasized.
Regarding the declining interest rate, the chief minister stated that Bank Indonesia (BI) is an independent entity.
He noted that the government could not interfere in the central bank's policy. The government summoned BI officials only to gather information regarding the steps it had taken and uncover reasons behind the depreciation of the rupiah. The officials were also called in to elaborate on their policy and assessment regarding the current economic conditions.
"So, the decision to raise or not to raise the interest rate is in the hands of BI," he added.
Regarding budget absorption, Minister Djalil clarified that it was still small, and it was March, and thus, the president has urged to accelerate the contracts, so that more money will circulate in the community.
"This will increase the buying power of the people and revive the industries due to the increasing demands from the public," he stated.
He noted that earlier, tenders were only carried out in June, July, or August, but in 2015, it would be carried out in March or April.
"It is hoped that budget absorption will reach 95 percent or will be bigger and better as more time will be available for the physical implementation of the development projects," he added.
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