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Indonesian power projects on hold on rupiah’s slump

Power lines hang from a transmission tower at a PT Perusahaan Listrik Negara (PLN) power plant in Pangkalan Susu, North Sumatra province, Indonesia, on Wednesday, April 8, 2015. For President Joko Widodo, a plan to build a $4 billion Japanese-Indonesian coal-fired power station presents a dilemma. He needs the electricity from new plants to power factories that would fuel growth and help rebalance the economy away from natural resources. At the same time, he needs to avoid alienating farmers and poor Indonesians who swept him into office last year. Photographer: Dimas Ardian/Bloomberg

By BLOOMBERG

JAKARTA • Indonesia plans to delay US$25 billion (RM103.75 billion) worth of power projects as it seeks to rein in a widening current account deficit and a sell-off in the nation’s currency.

The government will delay almost half of the planned 35GW of electricity projects as it wants to ease pressure on imports, Energy and Mineral Resources Minister Ignasius Jonan told reporters in Jakarta on Tuesday. The deferment may help reduce imports of about US$8 billion to US$10 billion, he said.

President Joko Widodo’s government is intensifying efforts to guard the rupiah, which is heading toward 15,000 to the dollar last seen during the Asian financial crisis two decades ago.

Bank Indonesia has adopted a number of measures to improve liquidity and authorities said they will clamp down on speculation in the foreign exchange market to curb volatility.

The government is also planning to curb imports of some consumer goods to ease pressure on the current account deficit.

“Power projects yet to achieve financing will be delayed as we want to reduce unnecessary imports,” Jonan said. The government also wants projects in the energy and mineral sectors to use local products as much as possible, he said.

A current-account deficit of 3% of GDP and foreign ownership of about 40% of government bonds have left Indonesia exposed to the sell-off sweeping across emerging markets as US interest rates rise.

The government will focus on boosting investment and exports to tackle the deficit, Widodo told reporters in Jakarta yesterday.

The decline in rupiah is due to external factors and the government will coordinate with the fiscal, monetary, industrial and business sectors to ensure the nation’s economic stability, his office said in a statement.

Jonan ordered mining and metal companies to repatriate export earnings to Indonesia or hold them in offshore branches of local banks to bolster dollar supplies.

Failure to follow the government’s directive can invite sanctions such as reduction in product ion quota, said Bambang Gatot Ariyono, DG of minerals and coal at the Energy Ministry.