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November 20, 2008

Support for Rupiah Currency
Indonesia govt to order energy firms to use local banks

Indonesia plans to order oil and gas contractors to use local banks to keep billions of dollars of funds earmarked for energy projects to help support the rupiah currency, the oil and gas regulator, Reuters quoted BPMigas as saying Thursday.

The plan comes as authorities have sought ways to support the rupiah currency, which has fallen sharply against the dollar.

"This move is expected to help Indonesia's economy," Priyono, the head of BPMigas, said by telephone.

The watchdog said that Indonesia expected funding for energy projects to reach $11 billion this year and $11-12 billion in 2009.

Another official at the watchdog also said it was aimed at helping the rupiah, which hit a fresh 7-year low against the dollar this week above 12,000 rupiah per dollar.

The rupiah has been at the fore of declines in Asian currencies spurred by falling stock markets and increasing evidence pointing to a global recession. Indonesia imports a significant amount of basic necessities especially food.

Failure to stabilise the rupiah, which has fallen more than 20 percent this year, could push up the cost of imported foods and put pressure on the country's balance of payments.

Bank Indonesia has been intervening in markets to defend its falling currency and it has also introduced a new measure on restricting buying foreign exchange.

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