Skyrocket before freefall
The economy during this period progressed so rapidly thanks to the deregulation packages. The banking and real sectors are growing, and investment and foreign loans are flowing. However, this condition is accompanied by something other than proper caution. Efforts to correct people who demand transparency are always considered disobedience. This economic glory was swept away after the rupiah exchange rate fell instantly.
BI position
Complicated dependencies
In this period, the Governor of BI was appointed as a ministerial-level official. This non-independent position makes it difficult for BI to carry out its functions as a central bank, such as in monetary control and promoting economic growth. As an aide to the government, BI also had to issue policies that were in line with changes in the government's strategy, which at that time wanted to encourage the role of the private sector in financing development. Bl did this by extending bank credit and empowering the interbank money market. BI continues to provide subsidized liquidity credit for high-priority economic sectors. But it has reduced the provision of KLBI.
PERIOD 5 (1997-1998)
Crisis on All Lines
Rupiah was in free fall
Houses were hit following the Thai Baht exchange rate crisis. BI's combined intervention efforts with the monetary authorities of Singapore and Japan did little to help stabilize the Rupiah's value. Foreign capital is attracted by speculation in the money market, and the foreign exchange market is rife. After the riots in May 1998, the Rupiah worsened—16,500 per dollar in June 1998. Before the crisis, one dollar was around Rp. 2,300.
At the end of 1998, the value of the Rupiah began to move steadily in the range of Rp. 7,500-Rp. 8,000 after a largely positive attitude towards economic developments and new government policies. Pe 1999, which went smoothly, had a pot effect, and the Rupiah strengthened.
