Indonesia to review capital goods imports to control deficit

JAKARTA: Indonesia plans to review the import of capital goods for big government projects to help manage its current account deficit, the finance minister said on Tuesday, part of a series of coordinated policy measures to bolster its financial markets.

The country´s rupiah currency, stocks and bonds have sold off as investors flee emerging markets amid rising U.S. interest rates, higher oil prices and the threat of a full blown U.S.-China trade war.

The vulnerability of Southeast Asia´s biggest economy has been increased by worries about its current account deficit.

Indonesia´s central bank has raised its benchmark rate by a total of 100 basis points, with the latest hike coming on Friday, amid efforts to defend the rupiah and stem capital outflows. Finance Minister Sri Mulyani Indrawati said the current account deficit was "a source of negative sentiment" for investors, so authorities were looking at ways to reduce it.

"We will look at the content, whether a project is urgent to be completed and must import capital goods," Indrawati told reporters, describing the measure as "a short-term correction for long-term development".

Indonesia´s current account deficit was 1.7 percent of gross domestic product last year, but is expected to widen to somewhere below 2.5 percent in 2018 as economic activity improves, Bank Indonesia (BI) has said.

During January to May this year, Indonesia imported $4.1 billion worth of goods in relation to the government´s infrastructure push and another $1.1 billion in defence equipment, central bank data showed.

The rupiah hit 14,455 per dollar on Tuesday, the weakest since October 2015 as Asian currencies are roiled by global trade tensions.