Jakarta eyes 7.5% tariff on imports

JAKARTA: Indonesia’s finance minister said yesterday that the government was prepared to take “strict corrective” measures to control swelling imports into Southeast Asia’s biggest economy, as policymakers scrambled to contain a slide in the rupiah currency.

Sri Mulyani Indrawati said a 7.5% import tariff would be applied to 500 consumer goods, including those bought online, in a bid to curb imports.

In addition, she said energy projects at state companies that require a large amount of imports would be delayed.

“With these, we hope our current account deficit ... can be l owered significantly,” Indrawati told a news briefing after a cabinet meeting.

She made the announcement after President Joko Widodo urged his ministers to make “real progress” to reduce the current account deficit and maintain the rupiah exchange rate at “a fair level”.

“Although we understand they will affect several sectors, these stabilisation measures ... will maintain Indonesia’s economic stability to face foreigners’ perception against the condition in emerging markets,” Indrawati added.

Indonesia has seen a market sell-off intensify after a report on Friday showed its current account deficit had widened to 3% of GDP in the second quarter, the highest in nearly four years.

After plunging by more than 1% on Monday, the rupiah hit its weakest level since October 2015, at 14,630 a dollar yesterday, before recovering slightly.

Bank Indonesia intervened to defend the rupiah on Monday and again yesterday conducted auctions for cheaper foreign exchange swap contracts to reduce hedging costs.

“The central bank will expand its swaps to not only US dollars, but also euro, yen and yuan daily to allow commercial banks to reswap any contract they offer to corporate clients in those currencies,’’ governor Perry Wariyo told the news briefing.

Bank Indonesia is due to announce its decision on benchmark interest rate today. It has raised the rate by 100 basis points since midMay to defend the rupiah, but is expected to hold, according to a Reuters poll.