Indonesia rates: More fine-tuning on regulations of FX proceeds
Keeping IDR and debt stable.
Group Research - Econs, Radhika Rao18 Jul 2023
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In a long-awaited move, Indonesia issued regulations that mandate the onshore retention of export proceeds for a minimum holding period. Proceeds from natural resources (referred to as DHE SDA) must be retained domestically for three months and is set to take effect from Aug 1 (press). This rule will apply to 30% of the resource exports with a value of more than $250k and without a compulsory conversion to rupiah. The move was well-flagged as well as long overdue and is thereby unlikely to trigger any significant reaction. These regulations were preceded by BI’s introduction of a special term deposit facility earlier in the year to channel commodity exporters’ FX proceeds to the domestic markets (BI details export earnings policy). These retained deposits might also flow into the BI’s special accounts, subsequently boosting the FX reserves stock. While official estimates of the expected quantum of such inflows are optimistic (at over $40bn), a further slip in commodity prices in 2H23 is a risk for such proceeds remitted back home.

The 1H23 trade surplus is down by a fifth compared to 1H last year, on course to register a narrower current account surplus, along with our expectations. USDIDR consolidated in a 14900-15100 range in the near term, with dips shallow and authorities keen to arrest bouts of IDR volatility. Foreign interest in IDR debt has retained momentum, with their ownership inching up in the past six months. The government’s plan to halve net bond issuance to IDR 362.9trn vs initial target IDR 712.9trn was an additional tailwind for the debt markets.


Radhika Rao

Senior Economist – Eurozone, India, Indonesia
[email protected]

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