(Sept 5): Indonesia plans to delay $25 billion worth of power projects as it seeks to rein in a widening current-account deficit and a selloff in the nation’s currency.
The government will delay almost half of the planned 35 gigawatts of electricity projects as it wants to ease pressure on imports, Energy and Mineral Resources Minister Ignasius Jonan told reporters in Jakarta on Tuesday. The deferment may help reduce imports of about $8 billion to $10 billion, he said.
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 a number of measures to improve liquidity and authorities said they will clamp down on speculation in the foreign-exchange market to curb volatility. The government is also planning to curb imports of some consumer goods to ease pressure on the current-account deficit.
Click to read about Indonesia import hit-list
“Power projects yet to achieve financing will be delayed as we want to reduce unnecessary imports,” Jonan said. The government also wants projects in the energy and mineral sectors to use local products as much as possible, he said.
A current-account deficit of 3 percent of gross domestic product and foreign ownership of about 40 percent of government bonds have left Indonesia exposed to the selloff sweeping across emerging markets as U.S. interest rates rise.
Read More: Rupiah Rout Puts Caviar, Chocolates on Indonesia Import Hit-List Bank Indonesia to Beef Up Tools ;in Battle to Shield Rupiah (2) Emerging-Market Contagion Fear Is Rising as Sell-Off Gets Deeper Why Pain in Argentina and Turkey Is Hurting Indonesia: QuickTake
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.
Bank Indonesia Governor Perry Warjiyo said on Tuesday that global uncertainties are rising due to an imbalance in world growth, rising U.S. rates and trade wars. The rupiah’s slump will have a limited impact on inflation and the central bank will keep intervening in the foreign-exchange and bond markets to curb volatility, he said.
“We will keep closely coordinating with the government to maintain the attractiveness of the domestic financial market and manage the inflation level,” Warjiyo said.
Jonan ordered mining and metal companies to repatriate export earnings to Indonesia or hold them in offshore branches of local banks to bolster dollar supplies. Failure to follow the government directive can invite sanctions such as reduction in production quota, said Bambang Gatot Ariyono, director general of minerals and coal at the energy ministry.
Crude oil producers in Indonesia must first offer their output to state-owned oil giant PT Pertamina rather than selling it in Singapore, Jonan said. The refiner and retailer will then be able to save as much as $4 a barrel on shipping cost alone, Arcandra Tahar, deputy energy minister said. - Bloomberg