Indonesia central bank says committed to free capital

Thu Nov 20, 2008 10:37pm EST  

JAKARTA, Nov 21 (Reuters) - Indonesia's central bank remains committed to the free movement of capital, the Bank Indonesia governor said on Friday, as the country's currency plunged to a new post Asian financial crisis low. 

Boediono's remarks came after the central bank last week tightened foreign exchange rules and the country's oil-and-gas regulator, BPMigas, said on Thursday it would order contractors to use local banks to deposit the billions of dollars earmarked for energy. 

"We are commited to our free capital movement law. Indonesia will remain committed to that, although there has been talk about restricting the movement of capital, our law guarantees the free flow of capital," Boediono told a news conference. 

"We will remain in the market and we will use our ammunition. Our reserves stand at $50.4 billion, which is a comfortable level compared to other countries." 

The rupiah currency was quoted at 12,500/13,000 per dollar by 0120 GMT, dropping further from Thursday's lows of 12,400 to levels last seen in August 1998, pressured by the fear of capital outflows. 

With the global financial turmoil affecting liquidity in Indonesia's banking sector, the country's deposit insurance agency (LPS) decided to take over a small lender, Bank Century Tbk (BCIC.JK: Quote, Profile, Research, Stock Buzz). 

Boediono said the deposit insurance agency decided to take over the small lender "to ensure the safety and quality of service to its customers". 

It is the first bank to be taken over by the government after the financial crisis in the late 1990s. 

The central bank had earlier said Bank Century, a relatively small bank with total assests of 15 trillion rupiah, was having problems in settling interbank payments due to technical problems, but said the issue was no threat to the country's banking system.

(Additional reporting by Tyagita Silka) (Reporting by Adriana Nina Kusuma, writing by Harry Suhartono, editing by Sugita Katyal)

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