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Indonesian Currency Turns Volatile After Day Of Panic Rupiah Rebounds As Suharto Promises To Carry Out Sweeping Economic Reforms

Sat., Jan. 10, 1998, midnight

Indonesia’s currency rebounded Friday from its devastating plunge, and President Suharto promised President Clinton he would carry out the sweeping economic reforms demanded by international lenders.

“Indonesia is serious about carrying out the plan,” Indonesian State Secretariat Minister Murdiono told reporters after a meeting with Suharto.

The battered rupiah rebounded to close at 7,990, up from Thursday’s record low of 10,550 to the dollar. Later in the day it gave up some of its gains on global markets, falling to 8,150 to the dollar by early afternoon in New York.

Thursday’s 26 percent slide came on reports that a $40 billion International Monetary Fund bailout plan was unraveling. That set off a wave of panic-buying in supermarkets and sparked numerous rumors including unfounded talk that troops had entered the presidential palace and Suharto had left the country.

The powerful military Friday said it would maintain security and warned the media not to spread false claims of unrest and political instability.

“The situation is now safe and stable. People shouldn’t worry,” armed forces spokesman Brig. Gen. A. Wahab Mokodongan said.

The Jakarta Stock Market’s index, which lost 12 percent Thursday, continued its downward trend. After an early rally, the market ended the day down 1.2 percent at 342.970.

Amid the volatility, the United States and the IMF dispatched top officials to Indonesia to discuss salvaging a faltering bailout effort.

Murdiono said Suharto had pledged support for IMF-backed reform during a telephone conversation with Clinton.

During the 20-minute call, Clinton made it “quite clear that the IMF program needs to be followed,” a senior White House administration official told reporters in Washington late Thursday on condition of anonymity.

Murdiono said Clinton had voiced his “concern” about the crisis, but also expressed “confidence” that Suharto’s government could overcome it.

Meanwhile, the Indonesian government postponed a $500 million purchase of Russian-built jet fighters and other military hardware due to the recent decline in the rupiah against the U.S. dollar. Indonesia was to have largely paid for the Russian aircraft with commodities. The first warplane was expected to arrive early this year.

At the same time, further work on a $3.2 billion project to build Indonesia’s first private oil refinery has been postponed until the economy improves.

Bambang Trihatmodjo, a partner in the project and a son of President Suharto, told Indonesian television about the delay in the Situbondo refinery project inaugurated Dec. 2 in eastern Java island. He urged the country’s business leaders to follow his example and delay giant projects.

Most supermarkets reopened Friday without the frenzied crowds of Thursday when nervous shoppers stripped shelves of sugar, rice, cooking oil and other food staples fearing big price hikes and possible shortages.

The capital, Jakarta, appeared calm.

“It’s business as usual,” one store manager said.

However, big crowds gathered again at some discount stores. Other stores that had sold out of goods remained shut.

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