In cities throughout Indonesia, housewives defied a police ban on demonstrations to march on government offices; in Djakarta, students and trade-union deputations presented petitions of protest. Reason: within seven days, the price of rice had doubled and the cost of cooking fuel had shot up 61% as Indonesia’s rupiah plunged unchecked. In less than two months the rupiah (officially 45 to the dollar) had fallen from 150 to a record low of 500.
Adding twirls to the inflationary spiral were the 2,500,000 Overseas Chinese who have been banned since Jan. 1 from
doing business in rural areas. Packing up for Hong Kong, Formosa or Red China, they have bought up watches, cameras and any other consumer items that they could carry with them. By week’s end, imported bicycles sold for the equivalent in rupiahs of $1,000, and refrigerators, when they could be found, commanded $4,000. Hong Kong sources estimate that Indonesian Chinese have smuggled out $4,000,000 to $6,000,000 in cash to Hong Kong, and diverted another $10 million to Singapore in the past six months.
As usual in the wild confusion of Indonesian affairs, the situation was desperate but not serious. Sending police into shops to stop further price boosts, the government blamed the drop-off mainly on Chinese panic buying. Actually, the government has gone on financing the deficit incurred fighting the 1958 rebellion by printing more rupiahs than the exports of Indonesia’s rich natural resources (nearly half the world’s rubber, a fifth of its tin, a third of its copra) could handily pay for. But 95% of Indonesia’s 90 million inhabitants, living in a subsistence rural economy that lies below the modern urban superstructure like the coral foundation of a South Pacific atoll, are undisturbed by the currency crises and budgetary storms that agitate the fringing reefs above.
That seems to be the easygoing appraisal of the U.S. Export-Import Bank in granting loans totaling $47.5 million to Indonesia last week for 1) a plant to use the natural gas of Palembang’s oilfields for making fertilizer for Indonesia’s rice terraces, 2) an electric power plant for East Java.
The loans, largest to be granted by the bank to Indonesia in ten years, were announced just five weeks before Soviet Premier Khrushchev’s scheduled good-will visit to Djakarta. Flashing his brightest smile, President Sukarno assured housewives on a Djakarta street corner that the U.S. loans, and Soviet and Red Chinese pledges of “unlimited credit,” were “proof of Indonesia’s increasing solvency.”
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