by Hayati Nupus
JAKARTA, Feb. 28 (Xinhua) -- The Indonesian government has updated the country's export foreign exchanges policy to maintain rupiah stability amid global economic pressures and tighter monetary policies.
The policy, which is set to take effect on Saturday, mandates that exporters retain all foreign exchange earnings from natural resource exports in the plantation, forestry, fisheries, and mining sectors (excluding oil and gas) within the domestic financial system for at least one year.
The previous regulation required only 30 percent of export foreign exchange earnings to be retained for three months.
President Prabowo Subianto said that this regulation aims to enhance national economic resilience by increasing foreign exchange reserves, which are projected to reach 100 billion U.S. dollars in the first year.
To support this initiative, Bank Indonesia has introduced financial instruments such as Bank Indonesia Foreign Exchange Securities and Bank Indonesia Foreign Exchange Sukuk to offer attractive returns to exporters. Additionally, the central bank has expanded its foreign exchange swap operations to encourage currency conversion to rupiah.
Airlangga Hartarto, coordinating minister for economic affairs, assured that the regulation would not disrupt exporters' operations, as export revenues could still be used for company expenses, taxes, and foreign debt payments.
"Company operations will not be affected. We understand that some businesses need to expand, so we will provide the necessary facilities," said Airlangga during a press conference.
Furthermore, the placement of foreign exchange revenues from natural resources in banks has already exceeded the minimum requirement of 30 percent, reaching 42 percent, according to Finance Minister Sri Mulyani Indrawati.
"With the full retention policy for coal, crude palm oil, and nickel, the three largest contributors to foreign exchange earnings, the government ensures that exporters will not face disruptions," Sri told the press.
With increased foreign exchange reserves, Bank Indonesia will have greater capacity to stabilize the rupiah and curb financial market speculation, said Lukman Leong, a currency analyst at Doo Financial Futures.
"However, this stability does not mean the rupiah will strengthen drastically, but rather that sharp fluctuations, which can disrupt the business environment, will be reduced," Lukman told Xinhua recently.
Lukman also highlighted that rupiah stability would boost investor confidence in Indonesia by minimizing exchange rate risks. Additionally, inflation and interest rates can be better managed, supporting economic growth.
However, the policy's impact may be limited without measures to address imported inflation, according to economic analyst Yanuar Rizki.
"If the demand for dollars for imports remains high, the rupiah will not strengthen significantly. Therefore, this policy must be complemented by efforts to reduce reliance on imported commodities while maintaining domestic price stability," he said.
Economist Josua Pardede warned that the policy could pose challenges for exporters requiring cash flow flexibility. He cautioned that if the policy is not implemented with sufficient flexibility, it could negatively impact exports.
Beyond its effect on exports, Josua noted that the policy contributes to macroeconomic stability. With larger foreign exchange reserves and a more stable rupiah, domestic interest rates can be better controlled, benefiting the business and investment sectors.
Capital market researcher Reza Priambada said converting export revenues into domestic financial instruments would reduce dollar demand and help maintain rupiah stability.
"The biggest challenge lies in management and oversight," Reza said. If funds parked domestically are not managed transparently, exporters and firms may find ways to circumvent the restrictions.
He emphasized that the government must ensure the policy offers attractive incentives and establishes robust monitoring systems to ensure that retained funds contribute to the national economy.
Reza also pointed out that rupiah movements are still influenced by external factors, such as global geopolitical developments and U.S. economic data releases.
"While the export foreign exchange policy can help curb volatility, external risks must still be anticipated," he added. ■
