Indonesia sacks bank chief in currency row

THE ASIAN crisis showed no signs of abating yesterday as Indonesia fired the governor of its central bank, and indicated it was moving ahead to peg the rupiah to another currency even as mounting objections made it likely the plan would lack the credibility it needed to succeed.

President Suharto gave no reason for dismissing Bank Indonesia governor Soedradjad Djiwandono. He replaced him with Sjahril Sabirin, a central bank director seen to lean favourably towards a so-called currency board. Mr Soedradjad was let go because "he opposed the currency peg, and it's a sign that Suharto is very much ready to implement the peg," said one currency strategist.

However, Steve Hanke, the Johns Hopkins University economist advising Indonesia on the currency board, shrugged off international objections, saying they were misplaced. "It's quite a mystery what's going on," he said. Mr Hanke dismissed opposition from the International Monetary Fund, the US and the European Union, saying the peg would stabilise the rupiah and help Indonesia meet the reform requirements under the IMF's $40bn (pounds 24.4bn) bailout.

His comments pulled up the rupiah, which recovered to 9,450 to the dollar after falling 0.5 per cent earlier in the day.

Meanwhile, the UK government has launched an initiative to increase the amount of European technical assistance available to the troubled Asian economies. The initiative, which will focus on financial sector restructuring, is being developed in the run up to the ASEM 2 Summit on 3-4 April, when Asian and European leaders meet in London.

The Treasury said Gordon Brown, the Chancellor, and Clare Short, Secretary of State for International Development, discussed their ideas with Jim Wolfensohn, World Bank President, when they met yesterday.