World Economy

Indonesia Wants to Raise Import Tariffs on 900 Consumer Goods

Shoppers may pay more for imported goods as the country looks to tariffs to halt currency slide.
Shoppers may pay more for imported goods as the country looks to tariffs to halt currency slide.

Indonesia is looking to increase tariffs on 900 consumer items to curb imports in a bid to protect the Indonesian rupiah, as the country battles to halt the fall in the currency.

Tariff rates of 2.5% to 10% are currently imposed on goods imported into Indonesia, and the government is looking to increase the rates for 900 consumer goods. Jakarta had previously said that it would review tariffs on 500 items, including capital goods. Now the number of items being reviewed has swollen to include 900 items, all of them consumer goods, Nikkei reported.

However, details of the number and types of items to be subject to tariff increases, as well as the size of the rate hike, are still being debated.

The government hopes that by curbing imports and improving the trade balance—the country’s trade deficit for July was the biggest in five years—it can support the rupiah, which has continued to fall against the dollar even as Bank Indonesia, the country’s central bank, raised interest rates by a total of 125 basis points in the last four months.

The Indonesian currency fell to 14,668 against the dollar, the lowest since October 2015. The rupiah has fallen more than 7% against the dollar since the start of the year.

“For imports of goods that are being produced by domestic industries, especially our SMEs, we will take very strict steps to control (the imports of) these consumer goods,” Indonesia’s Finance Minister  Muryani Indrawati told reporters after a meeting with other ministers on Friday. “In addition, the ministry of finance with the ministry of industry will look at the capacity of domestic industry to meet domestic demand if import restrictions are made.”

The announcement is the latest in a series of measures ordered by President Joko Widodo in his battle to halt the currency’s fall. He is cutting back on infrastructure projects, which was his signature policy, to curb the import of capital goods. Projects by state oil and gas group Pertamina and state utility PLN in particular will come under scrutiny. Those projects with high import content and which have not reached financial closing will be delayed.

The president has also ordered a measure to boost consumption of locally produced palm-oil biodiesel to cut the use of imported fuels.

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