Indonesian exporters must keep their earnings in the country to support efforts by the government to rein in the current-account deficit and shield the rupiah, Indonesian Minister of Finance Sri Mulyani Indrawati said yesterday.
While legislation protects the free movement of capital, authorities want to tighten some rules on exporters amid a rout in the currency, Indrawati said in an interview with Bloomberg TV’s Haslinda Amin in Hanoi.
“In a situation in which the country cannot even hold the revenue, for example from the exports, we really need to regulate a certain thing,” she said. “The foreign exchange that they earn from the exports, it needs to be in the country.”
Exporters repatriated more than 90 percent of their earnings in the second quarter, but only 14 percent of that was converted into rupiah, central bank data showed.
The currency’s slump to its weakest level since the 1997-1998 Asian financial crisis has pushed policymakers into action.
Jakarta, to help rein in a current-account deficit of 3 percent of GDP, has boosted taxes on imports and increased the use of biodiesel to cut fuel purchases from abroad.
Bank Indonesia has raised interest rates four times since May and pledged more preemptive measures to quell the sell-off.
Indrawati said the global debate about capital controls has changed since the financial crisis, and some nations might be “justified” in protecting themselves.
The former World Bank managing director also called for greater global policy cooperation to tackle the emerging market turmoil, which was triggered by rising US interest rates and a stronger US dollar.
“Each country has to take what is necessary for them to protect, but at the same time we have to be able to come up to this cooperation and coordination,” she said. “Everybody is now so busy with their own domestic policy that creates even more damage for their own, as well as for the global economy.”
She also said that the central bank is independent and would continue adjusting its policy rate and intervening in markets to curb volatility.
“Bank Indonesia is going to continue doing their policy mix, not always intervention, but in this case interest rates, intervention as well as allowing the flexibility to absorb,” she said.
Indonesia is not an exception the emerging-market slump and is moving along with other developing economies, she said, adding that the deficit is “much lower” and the fiscal position “much better.”
Revenue is up more than 18 percent as of last month, with tax receipts 16.5 percent higher. The budget deficit was 1 percent of GDP compared with 1.6 percent in August last year.
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