From Caviar to Coffee, Indonesians May Have to Pay a Lot More for Imported Goods
(Bloomberg) -- Caviar, chocolate and stretch limousines could get a whole lot more expensive in Indonesia as the government takes steps to curb imports and halt a sliding currency.
Authorities have reviewed 900 products -- from luxury items to basic goods like coffee, tea, pasta and ice cream -- some of which will soon carry higher import taxes. A final list will be published as early as Wednesday.
Finance Minister Sri Mulyani Indrawati said Tuesday the restrictions were needed after imported consumer goods surged more than 50 percent in July and August. “The government’s current efforts to cut imports, especially for consumption goods, might affect household consumption growth next year,” she said.
The government and central bank are stepping up action to protect the rupiah, which is heading toward 15,000 to the dollar for the first time since 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.
“If there is sentiment coming from speculation, if there are some parties trying to benefit from the current situation for their own interest, the government, Bank Indonesia and the Financial Services Authority will monitor and take firm action against them,” Indrawati said.
“This is needed to differentiate the genuine players in the economy, who maintain the economy and their businesses amid the current volatility, with those who only want to make profit,” she said.
A current-account deficit of 3 percent of gross domestic product and foreign ownership of about 40 percent of government bonds have left Indonesia exposed to the selloff sweeping across emerging markets as U.S. interest rates rise.
Bank Indonesia’s four interest-rate hikes since May and direct market intervention have failed to curb the currency’s more than 9 percent slide against the dollar this year, among the worst performers in Asia.
The rupiah lost as much as 0.8 percent to 14,933 on Tuesday, the lowest since July 1998. The Jakarta Composite Index fell as much as 1.2 percent, extending its retreat into a fourth day, the longest streak since June 22.
The goods that had been under review already attract import taxes of between 2.5 percent to 10 percent, on top of import duties on some that are as high as 150 percent. The list also included garments for fencing and wrestling, surgical gowns and motor cars including stretch limousines and armored cargo vehicles.
The import curbs come alongside other government measures aimed at narrowing the current-account deficit, such as increasing the use of palm oil to reduce crude imports, delaying some infrastructure investment and rescheduling shipments.
Analysts say the restrictions may have had unintended consequences. Some importers have rushed to boost purchases before the curbs were implemented, increasing the demand for foreign currency and exacerbating the currency’s depreciation, according to Jemmy Paul, chief executive officer of PT Sucorinvest Asset Management and David Sumual, chief economist of PT Bank Central Asia in Jakarta.
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