Policies Announced to Plug Current-Account Deficit, With More to Come
Jakarta. The Indonesian government on Monday announced seven policies as part of an effort to narrow the persistent deficit in Indonesia’s current account.
“We are doing structural adjustments to our economy. There will be more announcements like this every month, and this has nothing to do with rupiah exchange rate,” chief economics minister Sofyan Djalil said on Monday.
Among the policies is a regulation that will merge the country’s state reinsurance firms.
Indonesia spent $1.3 billion in foreign insurance over the past two years as local firms lack the capital to cover big claims, data from Bank Indonesia showed.
Another policy requires all commodities exporters to only accept letters of credit in selling their goods, instead of using an open account, in order to guarantee payment, Sofyan said.
The government will also expand visa-free short-term visits to citizens of 30 new countries, bringing the number of visa-exempt countries to 45, in order to boost foreign arrivals.
The country received $9.8 billion from travel services last year, up 7.5 percent from 2013, data showed.
Other policies will waive value-added tax for shipbuilders and other strategic industries; impose a temporary anti-dumping tax to curb imports; increase mandatory biofuel content in diesel to 15 percent; and provide tax allowances to export-oriented companies.
Sofyan said some policies would be effective as of April 1 and others from April 16, but he did not specify in which order they would be rolled out.
A narrowing current-account deficit would prop up the rupiah, said Tony Prasetiantono, an economist at Yogyakarta’s Gadjah Mada University, but the policies’ impact would only become apparent to the rupiah over the long term.
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