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BI denies freezing U.S. dollar accounts

Jakarta Post - December 4, 1997

Jakarta – Bank Indonesia, the central bank, yesterday denied rumors that it would convert bank deposits into government bonds and freeze U.S. dollar accounts.

"Regarding the misleading rumors that the government would convert bank deposits above certain amounts into government bonds, it must be stressed that the news is not true at all," the central bank said in a statement.

"It is also not true that the government would freeze U.S. dollar accounts at banks," the bank said.

Rumors have been circulating here that the government would convert bank deposits of more than Rp 20 million (US$5,120) into government bonds so that the money would be kept longer in the banking system and not redeemed to buy U.S. dollars.

Rumors also created concern that the government might freeze dollar accounts to give support to the rupiah.

"We appeal to the public not to believe such rumors and rely on government policy and information," the central bank pleaded.

"Public calm will help greatly in our effort to restore the economy and strengthen our economic defense to face the monetary crisis confronting this region," it added.

Bank Indonesia's denial combined with its market intervention, stabilized the rupiah at 3,940 against the U.S. dollar at the spot market -approximately the same level of the previous day's close.

Currency dealers said that the central bank was seen intervening in the market after the rupiah touched the day's low of 3,955 to the dollar.

They said the central bank had tried to drain some excess rupiah from the money market by bidding overnight money at around 15 percent through some state banks.

The central bank had absorbed some overnight money Wednesday from the interbank market along with overnight and oneweek swaps in an effort to slow the fall of the rupiah.

Meanwhile, International Monetary Fund (IMF) Managing Director Michel Camdessus said yesterday in Tokyo that it could take several more months to see a turnaround in the Indonesian economy.

But he added that the rupiah would stabilize if Indonesia remained committed to implementing its IMF program.

"In the case of Mexico, it took several months... before the economy had its U-turn. It will possibly take several months more for a U-turn to materialize (in the Indonesian economy)," he was quoted by Reuters.

"I received from President Soeharto the strongest assurances that he himself was fully backing the (IMF) program," he said.

"I believe that if they continue in that direction, you will see not only the rupiah stabilize, but the economy to be prepared for a good new start."