Jokowi calls for steps to attract more dollars

Jakarta • Indonesia will expand the use of biodiesel as President Joko Widodo explores options to boost foreign-exchange earnings and contain a ballooning current-account deficit in South-East Asia’s biggest economy.

Widodo, better known as Jokowi, will soon sign a revised presidential decree that widens the palm-biodiesel mandate to more users from August, potentially saving US$5.5 billion (RM22.33 billion) annually in crude oil imports, according to Coordinating Minister of Economic Affairs Darmin Nasution. The president also ordered his ministers to identify new ways to boost exports and shore up foreign reserves.

“The country’s situation is that it needs dollars,” Jokowi told ministers at the start of a Cabinet meeting held in Bogor, near Jakarta yesterday.

“Therefore, I ask every ministry and institution to be serious in dealing with this.” Jokowi’s government is grappling with an emerging-market sell-off and a deteriorating current-account deficit that’s set to swell to the highest in four years. The rout prompted the central bank to hike its benchmark interest rate by 100 basis points since mid-May and to drain about US$12 billion from its reserves since it reached a record in January to partly defend the currency.

The government has been looking at various ways to boost dollar inflows, including through tourism and by encouraging exporters to repatriate their greenback holdings and convert them into rupiah.

The government had previously asked the transportation industry to use fuel blended with 20% palm- based biofuel, or B20, with plans to expand the mandate to railways, military and mining vehicles this year. The government plans to launch the expanded B20 programme in early August, Darmin told reporters yesterday.

Jokowi also urged ministers to remove obstacles to trade and for imports to be curbed wherever possible to save dollars. Increased use of locally produced components in manufacturing can save about US$2 billion annually, according to Industry Minister Airlangga Hartarto.

While the government had toyed with the idea of scrapping a rule that mandates coal miners to supply the domestic market at a fixed price, it won’t proceed with the proposal immediately, Mineral Resources Minister Ignasius Jonan said. The domestic market obligation is man- dated by a 2009 mining law and the cap on the price of domestic coal for power stations of US$70 per tonne will remain in place, he said.

Foreign investors have pulled a net US$3.7 billion from bonds and stocks this year as the rupiah weakened almost 6% against the dollar, according to data compiled by Bloomberg. The current-account deficit is seen widening to about US$25 billion this year, or about 3% of gross domestic product, according to Bank Indonesia governor Perry Warjiyo. — Bloomberg