Indonesia’s forex earnings rules seen raising reserves by up to US$50 billion, says government
INDONESIA will require some exporters to retain around 30 per cent of their export earnings onshore for three months under new rules aimed at shoring up the country’s foreign exchange reserves by up to US$50 billion a year, a senior official said on Monday (Feb 13).
Chief economic affairs minister Airlangga Hartarto said the plan aimed to anticipate the impact of further US monetary tightening and the upcoming maturity of government and corporate bonds denominated in US dollars.
“The government is looking at what needs to be done so that Indonesia’s FX (supply) does not run dry,” Airlangga told an economic seminar.
He noted that the size of FX trading in neighbouring Singapore dwarfed that in Indonesia, increasing economic vulnerability since it “made it very easy for other parties to corner a country like Indonesia”.
The planned rules would still be less strict than in some other countries in the region, such as Thailand and Malaysia, Airlangga said.
The rules should bump up Indonesia’s FX reserves by US$40 billion to US$50 billion in a year, he said. The country’s reserves stood at US$139.4 billion at the end of January.
Airlangga did not say when the rules would become effective. Finance Minister Sri Mulyani Indrawati has previously said the planned regulation, which she has stressed is not a form of capital control, would be issued this month.
South-east Asia’s largest economy has since 2019 mandated that all natural resource exporters receive earnings in a special account at local banks. Authorities have provided incentives for companies to keep funds longer onshore and convert them to rupiah. Exporters are, however, free to move funds offshore.
The central bank said last year some of the exporters transferred their proceeds soon after receiving them because offshore banks offered higher interest rates for term deposits amid a tighter supply of US dollars globally.
Indonesia registered record annual exports last year of US$292 billion and its biggest annual trade surplus of US$50.5 billion, driven by an upward cycle of global commodity prices. REUTERS
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