REPUBLIKA.CO.ID, JAKARTA -- Bank Indonesia said it is very irrelevant to compare rupiah depreciation in 2018 with one in 1998 when the country was beset by monetary crisis. The country's economic fundamental is much stronger at present than 20 years ago, the Central Bank said.
One simple indicator to see the impact of the rupiah value is by comparing the volatility of the currency and the price developments and inflation rate, it said. Currently the inflation is well under control at 3.2 percent year-on-yer in August 2018, Executive Director of the International Department of the Central Bank Doddy Zulverdi said at a discussion forum here on Monday.
In the same month in 1998, the inflation was 78.2 percent year-on-year, Doddy said. He said currently rupiah is around the level of 4,900 per U.S. dollar weakening from the previous level of 13,400 a year earlier or a depreciation of 8 percent.
"This is different from a much sharper fall in value to the level of 15,000 per dollar 20 years earlier," he said.
In September 1998, rupiah was at the level of Rp10,750 per dollar or shrinking in value 254 percent from September 1997 when rupiah was at the level of Rp3,030 per dollar. Coordinating Minister for Economy Darmin Nasution said the condition in 1998 was more than five times worse than at present.
"Our economy is still strong. Our only problem is current account deficit," Darmin said.
Doddy said it was wrong to see the rupiah value as psychological figure. He added the exchange rate should be seen from the volatility.
For economic players what is relevant is how volatile or how fast the change in the exchange rate. If the change is only from 13,500 to 15,000 per dollar, the depreciation is only around 7-8 percent, Doddy said.
Currently the Central Bank still has enough ammunition to maintain stability of the rupiah value in comparison with the condition in 1998, he said. In addition, in August, 1998 , the country's foreign exchange reserve was only US17 billion as against US$118 billion in August 2018.
Also it is important to note non performing loan in 1998 reached more than 30 percent as against only 2.7 percent at present. Foreign exchange is a parameter, which is also seen by global investors in assessing the economic security.
Doddy said Bank Indonesia promised to maintain stability of rupiah such as through double intervention in government securities market and foreign exchange market, reduction of cost of foreign exchange swap and adjustment and adjustment in monetary policy.
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