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Fri, Sep 02, 2005 - Page 12 News List

Rupiah, stocks plunge as Jakarta fails to act

SLIPPERY SLOPE A special address yesterday by Indonesian President Susilo Bambang Yudhoyono did not address the issue of fuel subsidies dragging the economy down

AFP , JAKARTA

The under-pressure rupiah weakened yesterday and stocks fell as Indonesians reacted with disappointment to a special presidential address that contained few concrete measures to bolster a sagging currency.

President Susilo Bambang Yudhoyono late yesterday made a much-anticipated address to the nation in which it had been hoped he would reveal a date to cut fuel subsidies growing ever costlier amid soaring global oil prices.

Vague

But Yudhoyono instead delivered a vague package aimed at combatting the rupiah's plunge -- which is due largely to the state oil firm snapping up US dollars to pay for oil imports -- saying only that subsidies would be cut after October.

"It turns out that we cannot find steps which could be used to overcome the root problems of our economy," an editorial in the Kompas daily said.

An editorial titled "A Vague Government Policy" charged that there was little of substance in Yudhoyono's speech. It, as in other editorials, urged clarity and urgency in hiking fuel prices.

Mangara Tambunan from the private Center for Economics and Social Studies said that although the government was clearly in agreement with hiking fuel prices, "people want a more precise date, a more precise amount."

He also said he found it disappointing that fiscal and monetary policies were not issued in tandem to try to help the rupiah.

"The potentials for more pressure on the rupiah are great if there is not synchronization between fiscal and monetary policies," he said.

The Jakarta Stock Exchange mirrored the disappointment, opening 21.268 points or 2.02 percent lower at 1,028.822 before recovering some of the lost ground to close trading at noon 1.26 percent weaker, at 1,036.858.

The rupiah was weaker against the US dollar in early trade. At 9:35am, the rupiah was at 10,650 to 10,750 to the dollar, down sharply compared to Wednesday's close of 10,300 to 10,400.

But the currency rallied by noon to close the morning trade at 10,440 to 10,475.

`Anti-climax'

The English-language Jakarta Post labelled the president's package "somewhat of an anti-climax" and said that the president should have announced a "clear-cut, definitive scheduling for the phasing out of fuel subsidies."

The rupiah hit a four-year low against the US dollar on Tuesday, triggering a plea for calm from the president, who insisted the economy was not heading for a repeat of the late 1990s financial crisis.

Analysts have repeatedly called for decisive action from Yudhoyono and that argued he should replace some members of his economic team amid increasing criticism for their handling of the rupiah's slide.

The currency has lost about 15 percent of its value this year.

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