Obscure fuel subsidy policy responsible for rupiah`s weaking

Pressure on the rupiah continues."

Jakarta (ANTARA News) - The obscure policy on fuel subsidy was responsible for the rupiah`s weakening against the dollar, an Indonesian Chamber of Commerce and Industry (Kadin) economist said.

"The cause of the rupiah`s depreciation against the dollar did not rest with the monetary sector but with the government`s doubtful and obscure policy to address the issue of fuel oil subsidy in the state budget," the chief of the chamber`s economic research and development studies institute (LP3E Kadin), Didik J. Rachbini, said here on Friday.

Discourse on whether or not the government would reduce fuel subsidy appeared two years ago before it decided to raise the prices of subsidized fuels in June 2013, he said at a discussion on evaluation of the national economy in the wake of the subsidized fuel price hike.

"The obscure policy on fuel subsidy complicated economic expectations so good economic momentum could not be maximally taken advantage of," he said.

While the discourse continued oil imports tended to increase, putting a pressure on the rupiah, he said.

He said pressure on the rupiah`s exchange rate against the dollar had not shown signs of abating despite Bank Indonesia`s decision to intervene in the money market. The rupiah has hit the upper limit of Rp10,000 per dollar.

"Pressure on the rupiah continues. But the rupiah`s weakening is not the result of Bank Indonesia`s performance which fails to control the exchange rate and therefore, the problem is outside the domain of the monetary sector," he said.

"So this is not the fault of Bank Indonesia but the economic policy authorities. I think the next president will inherit this problem," he said.

He said the government`s decision to reduce fuel subsidy in June was not proper because it was taken ahead of the Muslim holiday of Lebaran. Consequently, monetary authorities did not have enough time to analyze the impact of fuel price hike on the national economy.

(Reporting by Yuni Arisandy/S012/F001)

Editor: Priyambodo RH
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