Indonesia, the world's top exporter of palm oil, has issued new rules requiring exporters of natural resources to receive earnings in the local banking industry, among new measures Jakarta announced last year to support the then falling rupiah.
The rupiah hit its weakest since the 1998 Asian financial crisis in October 2018 due to capital outflows linked to rising U.S. interest rates, the U.S.-China trade war and a widening of Indonesia's current account deficit.
Other measures authorities have taken to support the rupiah include raising interest rates, increasing import taxes, delaying infrastructure projects and widening biodiesel use.It has regained some ground thanks to improving investor appetite for risky assets, though gaps in Jakarta's merchandise trade and current account remain wide.
The details of the new regulations, which were signed by President Joko Widodo this month and made public this week, were similar to what ministers had revealed in November.
Export revenues from the shipment of resources from the mining, plantation, forestry or fishery sectors must be kept in a special banking account, whether in foreign currency or converted into rupiah, effective immediately. Indonesia is also a major exporter of thermal coal and rubber.
Exporters are allowed to take funds out to pay for imports, taxes, debts or dividends as long as they provide a supporting document to prove that the transaction is real.
If they don't comply, authorities could fine, bar them from exporting or even revoke their business permit.
Indonesia has required exporters to receive earnings through onshore banks since 2012. Central bank data shows that 90 percent of such earnings already flows through local banks, but only 15 percent is converted to rupiah.
Most members of the Indonesian Coal Mining Association have already complied with the 2012 rules, executive director Hendra Sinadia told Reuters.
But he said the government should apply "such extreme" sanctions for violations.
"We contributed to the state in the form of foreign currencies and royalties," Sinadia argued. "It feels like the penalties are not balanced, considering the contribution we make."
Other measures authorities have taken to support the rupiah include raising interest rates, increasing import taxes, delaying infrastructure projects and widening biodiesel use.
(By Gayatri Suroyo, Maikel Jefriando and Wilda Asmarini; Editing by Nick Macfie)