Indonesian markets rise

Parliament dismissed President Wahid's state of emergency

Indonesia's currency strengthened and its stock market closed at a 10-month high on Monday as traders reacted positively to the fall of President Abdurrahman Wahid.

The Jakarta stock market's benchmark JKSE index closed up 2.02% - its highest close since 8 September 2000.

Profit-taking pulled the index down slightly from the 3.4% rise registered at the end of morning trade.

At one point, the rupiah rose to 10,100 against the US dollar, strongly up on the 11,138 level it was trading at late on Friday, though it later fell back slightly to 10,225.

The surge in the currency and stock prices came ahead of Megawati Sukarnoputri's swearing in as president to replace Mr Wahid, whose earlier declaration of a state of emergency was rejected by the legislature.

Bank Indonesia positive on rupiah

As the currency strengthened on Monday, the central bank said the rupiah could breach 10,000 if the political situation improved.

Bank Indonesia said late last week the rupiah had fallen by 13.4% in the April-to-June period.

The bank said the currency's fall was partly due to Indonesians buying foreign currency as a buffer against political unrest.

IMF loan still on track

A senior Jakarta-based official with the International Monetary Fund said a change of government should not make any difference to the resumption of its loan programme.

"We agreed with the government on a set of policies and that set of policies can be put into place irrespective of the composition of the government," said IMF senior resident representative in Jakarta John Dodsworth.

Mr Dodsworth, said on 17 July that a loan of $400m could be paid as soon as August. The loan has been frozen since December 2000.

Correspondents say the loan is vital to open the way for more foreign aid and to lure wary investors back.

We agreed with the government on a set of policies and that set of policies can be put into place irrespective of the composition of the government

John Dodsworth, IMF official

Political unrest was a factor in the central bank's decision to raise its 2001 inflation target last week. It forecast inflation in 2001 would be between 9% and 11%, instead of its previous estimate of between 6% and 8.5%.

The original inflation target "will be exceeded because of continuing risk factors... which will cause economic conditions in the second half to worsen", the bank said.

Prices at the end of June were 3.28% higher than at the end of March, it said.

Prices edge up

The yearly consumer price index (CPI) inflation rate for the second quarter of 2001 was up 12.11% on the second quarter of 2000.

The cumulative inflation rate for the year to 30 June was 5.46%.

Indonesia's economy has floundered from one crisis to another in the last few years.

The country is struggling to re-build a collapsed banking sector, while paying interest on a huge debt which almost exceeds its annual gross domestic product.