Jakarta. President Joko "Jokowi" Widodo said on Wednesday (05/09) that multiple external factors were behind the rupiah's fall to 20-year lows and the priority was to increase investment and exports to contain Indonesia's current-account deficit.
The rupiah, stocks and bonds have sold off as investors flee emerging markets, with the vulnerability of Southeast Asia's biggest economy increased by worries about its current-account deficit and need to import oil.
Jokowi pointed to external factors such as rising interest rates in the United States, a US-China trade war, as well as crises in Turkey and Argentina for the pressure on Indonesian markets.
"There are only two key [things] – investments must continue to increase and exports must also increase so [we] can resolve the current account deficit," the president told reporters during a visit to Tanjung Priok Port in North Jakarta, in comments posted on the cabinet secretary's web page.
Indonesia's current-account deficit was 1.7 percent of gross domestic product last year, but is expected to widen to around 2.5 percent in 2018 as economic activity improves, Bank Indonesia has said.
The president made the comments as the rupiah was trading at 14,926 against the dollar, near its lowest level since the 1998 Asian financial crisis, after losing around 9 percent so far this year.
The central bank "decisively intervened" in the foreign exchange and bond markets on Wednesday morning to "smooth volatility" of the rupiah, Nanang Hendarsah, head of monetary management at Bank Indonesia, told reporters.
Indonesia's benchmark 10-year bond yield was at 8.423 percent, up from previous day's closing of 8.340 percent.
The Jakarta Composite Index fell 3.1 percent – its fifth straight session of losses – and was poised for only its second decline of more than 3 percent since November 2016.
The government said on Tuesday that the authorities would take firm action against currency speculators, and announced plans to delay import-heavy energy projects.
Finance Minister Sri Mulyani Indrawati did not specify what sanctions speculators could face, but warned that the central bank and the Financial Services Authority (OJK) would check large currency transactions to ensure they were based on trade or commerce.
To anticipate future dollar requirements, Jokowi asked ministers to assess how much foreign currency would be needed to pay for imports related to large infrastructure projects.
The government also announced plans to delay an estimated $24 billion to $25 billion in import-heavy power station projects, and rules to force exporters to keep earnings at home, among efforts to prop up the ailing rupiah.
To reduce the oil import bill, Indonesia has sought to boost of the use of biodiesel. Sri Mulyani said the government would announce import tariffs on hundreds of consumer goods on Wednesday. Under further planned changes, Indonesian oil producers must offer crude to Pertamina before selling it overseas, a move anticipated to save the state energy company up to $4 per barrel on shipping costs.