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Indonesian reserves down inflation up

Source
Kyodo - March 3, 1998

Jakarta – Indonesia's foreign exchange reserves dropped to 16.33 billion U.S. dollars at the end of February from 17.07 billion dollars Feb. 16, and from 28.85 billion dollars in June 1997, before the country began to face its current economic crisis, the central bank said Tuesday.

Miranda Gultom, the central bank's director for monetary and economic statistics and research, said in a statement that current foreign exchange reserves will be enough to finance the importation of non-oil and gas products for four months.

In addition, she said, Indonesia has 1.87 billion dollars in standby loans.

Currency dealers said the central bank may have used the reserves to defend the battered rupiah, the country's currency.

The latest announcement from Bank Indonesia, the central bank, was issued amid criticism over Indonesia's plan to set up a currency board to peg the rupiah to the dollar.

The International Monetary Fund (IMF) and world leaders have opposed the idea, saying it would plunge the country's economy deeper as it needs to maintain its large foreign exchange reserves.

Local newspapers quoted the Central Bureau of Statistics as saying that rising commodity prices pushed the country's monthly inflation rate to 12.76% in February, compared with 1.05% in the same month last year.

The figure marked the highest monthly inflation rate in the 30 years of President Suharto's government.

It also pushed the rate for the 11 months of the current fiscal year, which will end March 31, to 28.73%, much higher than the 5.29% cumulative inflation rate recorded in the same period in the previous fiscal year.

The bureau said that in February, food prices increased by 16.07%, housing by 10.03%, clothing by 15.62%, and miscellaneous goods and services by 9.31%.

The government projects the inflation rate for next fiscal year to reach 20%.

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