Indonesia to review capital imports

JAKARTA: Indonesia will review imports of capital goods to help rein in the current-account deficit and stem a deepening currency rout.

Finance Minister Sri Mulyani Indrawati said major government projects could be shelved as authorities widen the scope of their efforts to stabilise the currency.

The rupiah has slumped more than 5% against the dollar this year and has remained under pressure even after the central bank raised interest rates by 100 basis points since May 17.

South-East Asia’s biggest economy has been among the hardest hit in the region following a sell-off in global emerging markets triggered by rising US interest rates.

One of the reasons the nation is so vulnerable is because of its reliance on foreign inflows to finance the current-account shortfall.

“If the current-account deficit is seen as a source of negative sentiment, we need to take measures to make a short-term correction for long-term development,” Indrawati told reporters on Tuesday.

The government would start reviewing “whether certain imports are really needed to support our economy,” she said.

Indonesia reported a current-account gap of 2.15% of gross domestic product in the first quarter. The deficit may reach 2.3% to 2.4% this year, according to the central bank.