Indonesia is advancing its efforts to stabilize its currency and bolster its central bank reserves with a new regulation requiring natural resource exporters to retain a larger portion of their foreign exchange (FX) earnings within the country. Announced by President Prabowo Subianto on Monday, the move is designed to add $80 billion to Indonesia’s FX reserves while addressing the country’s struggling rupiah.
The new policy mandates that exporters in key sectors such as mining, plantations, forestry, and fisheries retain all of their foreign earnings onshore for a minimum of one year, effective from March. This represents a significant shift from previous regulations, which only required 30% of proceeds to remain in the country for at least three months.
Oil and gas exporters are exempt from the new regulation. Prabowo clarified that exporters will still be able to use their retained foreign earnings for various purposes, including paying taxes, dividends, loans, and procuring essential materials that are not available locally.
“The goal is to optimize natural resource revenues for national development, stimulate domestic financial circulation, and enhance foreign exchange reserves and the stability of the exchange rate,” Prabowo explained. He noted that historically, much of Indonesia’s foreign earnings have been kept in overseas banks.
According to Coordinating Minister for Economic Affairs Airlangga Hartarto, Indonesia’s natural resource exports, including from mining, plantations, forestry, and fisheries, accounted for $166 billion—or 63% of total exports in 2024.
This regulation comes as the rupiah has struggled against the US dollar, partly due to global trade concerns, economic growth uncertainties, and President Prabowo’s ambitious fiscal policies. The currency has been one of the worst performers in Asia over the past three months, prompting central bank interventions to stabilize the market.
Bank Indonesia Governor Perry Warjiyo expressed confidence that the new rules would help strengthen the domestic financial system, support the rupiah, and encourage more domestic financing.
Economist Hosianna Evalita Situmorang of PT Bank Danamon Indonesia cautioned that further clarity on the specifics of the regulation is needed to assess its full implications. She questioned whether the use of FX earnings for certain expenses could diminish the rule’s effectiveness in boosting the domestic financial market.
The policy shift was announced amid disappointing trade data, showing a rare decline in imports as Indonesian consumers scaled back spending on foreign goods. However, exports did increase, albeit at their slowest pace in seven months, with strong growth in agricultural and fisheries exports partially offset by declining shipments of coal and palm oil.
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