Indonesia plans to delay $25 billion worth of power plant projects across the country to limit the need for imports and seeking to rein in its widening current account deficit.
Ignasius Jonan, Indonesia’s Minister of Energy and Mineral Resources, said the delay in almost half of Indonesia’s planned 35 gigawatts of electricity projects, it may help reduce imports of about $8 billion to $10 billion.
President Joko Widodo’s government is intensifying efforts to guard the rupiah, which is heading toward 15,000 to the dollar last seen during the Asian financial crisis two decades ago.
Bank Indonesia has adopted some measures to improve liquidity and authorities said they would clamp down on speculation in the foreign-exchange market to curb volatility.
The Indonesian government also plans to curb imports of various consumer goods to ease pressures on the current account deficit that touched 3.0 percent of gross domestic product (GDP) in the second quarter of 2018.
On Wednesday (05/09) a final list is expected to be published containing products that will soon carry higher import taxes. On the short-term, this policy may lead to a rapid surge in demand for foreign consumer products (thus putting more pressure on the rupiah) as importers want to take advantage of lower import tariffs ahead of the hike.
Indonesian President Joko Widodo said multiple external factors are behind current rupiah weakness and the government will coordinate with the fiscal, monetary, industrial and business sectors to ensure the nation’s economic stability.
Widodo prioritizes to see an increase in investment and exports to contain the country’s current account deficit.
Bank Indonesia’s four interest-rate hikes since May and direct market intervention have failed to curb the currency’s more than 9 percent slide against the dollar this year, among the worst performers in Asia.
Sources: Bloomberg.com, indonesia-investments.com