Indonesia will release a list of goods subject to higher import taxes in the next few weeks, ministers said on Friday (24/08). (Antara Photo/Sigid Kurniawan)

Indonesia to Unveil Higher Import Tariffs Soon Amid Push to Aid Rupiah


AUGUST 24, 2018

Jakarta. Indonesia will release a list of goods subject to higher import taxes in the next few weeks, ministers said on Friday (24/08), part of efforts to shrink a widening current account deficit and curb pressure on its shaky currency.

The rupiah on Friday slipped to 14,660 to the dollar, its weakest level since October 2015.

A central bank official on Thursday blamed the rupiah's drop on high demand for dollars by local importers. But the currency has also been caught up in a flight from emerging market assets as US interest rates rise and worries about global trade fights increase.

Indonesia's July trade deficit was the biggest in five years and the second-quarter current account deficit, at 3 percent of gross domestic product, was the largest in nearly four years.

"We are reviewing 900 imported commodities to see the domestic industry's capability in producing them," Finance Minister Sri Mulyani Indrawati told a news conference with other ministries and Bank Indonesia (BI).

Indrawati previously said the government would impose a 7.5 percent tariff on about 500 imported goods that can be locally made.

Southeast Asia's largest economy currently applies a 2.5 percent import tax on a vast range of products for registered importers, but it charges 7.5 percent for unregistered importers.

Suahasil Nazara, head of the finance ministry's fiscal policy office, said the government was rethinking the tariff difference between registered and unregistered importers.

"We will hike the import tariffs from the current rates to give a signal, 'let's use domestic production,' " Nazara said.

Trade Minister Enggartiasto Lukita said the measures to contain imports should not disrupt investment because the list would not include raw materials for production.

A senior government official told Reuters the list, which is not finalised, will focus on semi-durable and perishable goods, including consumer goods used by hotels and restaurants.

Stabilising the rupiah has been a top priority for the government and BI. The central bank has raised interest rates four times by a total of 125 basis points since mid-May.

BI governor Perry Warjiyo said the central bank continues to intervene in the FX and bond markets to defend the currency.

The government's measures to control imports also include delaying some infrastructure projects and forcing a greater use of biodiesel.