National flag carrier Garuda Indonesia has announced that it will immediately use the rupiah for all transactions carried out in Indonesia, a move aimed at supporting the government’s policy to boost the rupiah exchange rate.
“We are committed to supporting the government’s regulation, whereby Garuda will soon implement the regulation and consistently use the rupiah for all transactions occurring inside the country,” said Garuda Indonesia president director Arif Wibowo.
The compliance with the regulation would maintain the stability of the rupiah exchange rate as well as strengthen Indonesia’s economy, he said in a statement on Friday.
Late last month, Bank Indonesia issued a regulation that required all business players in the country to use the rupiah for transactions inside the country. The regulation is aimed at strengthening the rupiah, which has been depreciating against the US dollar.
The obligation to use the rupiah in all transactions in the country is expected to boost demand for the currency, eventually helping it regain its value against the dollar.
Many business players in the service sector still used dollars in their transactions although the 2011 Currency Law prohibited the use of currencies other than the rupiah for transactions, Bank Indonesia previously stated.
Previously, Garuda quoted international tickets sold in Indonesia in dollars. Although, customers were allowed to use the local currency when purchasing tickets, the airfare price was based on dollars.
“We are the first state enterprise that has declared its readiness to support the use of rupiah. We expect other state enterprises to follow,” said Garuda finance and investment risk director Ari Askhara.
The rupiah’s depreciation against foreign currencies partly contributed to Garuda’s net loss of US$373 million in 2014 worsening from an $11.2 million net profit in 2013.
Ari said that his firm had prepared measures to mitigate further currency risk in the future.
On Tuesday, Garuda signed a partnership agreement with four private banks, namely Bank Internasional Indonesia, Bank Mega, ANZ Indonesia and Standard Chartered Bank, for a Rp 1 trillion hedging facility.
The facility spans three years in the form of a cross-currency swap (CCS), which aims not only at preventing losses from interest rate volatility as it sets repayment at the original rate.
Meanwhile, the national flag carrier said earlier this week that it planned to open new routes to Germany and France this year, as well as to target other markets in Europe, China and the Middle East.
Garuda Indonesia finance director Ashkara Danadiputra said the flights that would serve the prospective routes would be ready by the second or third quarter of 2015, as the carrier was awaiting the delivery of three new Boeing 777s.
“The 777s that we ordered will not be efficient if they are used on short- or medium-haul routes. It costs the same to fly them on a long-haul route,” Ashkara said on Tuesday as quoted by Antara news agency. –
Originally posted on July 2, 2015 @ 3:14 pm