UPDATE 1-Indonesia’s central bank orders importers to report FX for overseas purchases

06-Dec-2019 Intellasia | Reuters | 6:02 AM Print This Post

Indonesia’s central bank announced new regulations on Wednesday requiring importers to report how much foreign currency they use for overseas purchases from next year, in a move to step up monitoring of money flows.

Bank Indonesia (BI) has since 2012 ordered exporters to receive their earnings through local banks, hoping that some of the funds would be kept onshore to increase domestic savings and make the rupiah currency less volatile.

Under the new regulations, BI argues that foreign exchange flows are instrumental in the rupiah’s stability and it needs data on import payments, not just on export earnings.

Importers buying oversees goods worth at least $10,000 will have to report their transactions to BI from January 1, 2020, the central bank said.

Failure to comply could lead to a suspension of import processing by the customs office, though this would only apply from 2021.

The regulation also orders exporters to report earnings online, directly to BI, instead of to the bank holding their earnings.

Ade Sudrajat, chair of the Indonesia Textile Association, said BI was making too many rules and should already be able to obtain information on FX flows from commercial banks.

“Each agency makes rules and it’s a headache for business,” Sudrajat said by telephone.

Under the new rules, exporters of natural resources must place their earnings in a special bank account.

Exporters looking to move the funds out of the account would have to provide a document to the bank that showed the transfer was for specific transactions such as imports, debt payments, royalties, dividends or salaries, it said.

The rules on resources earnings take effect on January 1, 2021 and reinforce a similar regulation issued by the government in January stating that revenues from shipments of resources from the mining, plantation, forestry or fishery sectors must be kept in a special bank account.

Indonesia is the world’s largest exporter of palm oil. It is also a major exporter of coal and minerals such as nickel ore.

The rules that were introduced in January were brought in after the rupiah hit its weakest level since the 1998 Asian financial crisis last year, pressured by rising US interest rates, the US-China trade war and a wider Indonesian current account deficit.

The rupiah has been less volatile in 2019 and is up nearly 2 percent so far this year against the dollar.

With inflation also benign, BI has cut interest rates four times since July, partly unwinding rate hikes last year to shore up the currency.



Category: Indonesia

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