Indonesia Implements New Foreign Exchange Retention Policy Starting March 2025

JAKARTA, Investortrust.id – Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto announced that the government will enforce a new regulation requiring exporters to retain 100% of their export foreign exchange earnings within the country for one year. 

By requiring exporters to retain their foreign exchange earnings for a year, the policy aims to increase the supply of dollars in the domestic market, thereby reducing reliance on external borrowing and maintaining economic stability. The government expects these changes to align Indonesia’s export retention system with international best practices, strengthening its macroeconomic framework.

This policy, set to take effect on March 1, 2025, will revise Government Regulation No. 36 of 2023 concerning export foreign exchange from natural resources.

“Under this policy, the government will soon revise Regulation No. 36, which will take effect starting March 1 this year,” Airlangga stated during a press briefing after a limited cabinet meeting led by President Prabowo Subianto at the Presidential Palace on Tuesday, Jan. 21, 2025.

Government and Central Bank Preparation

Airlangga explained that Bank Indonesia (BI), the country's central bank; the Financial Services Authority (OJK); commercial banks; and customs authorities are preparing the necessary systems to implement the policy. The government also plans to conduct outreach programs to familiarize stakeholders with the new rules.

"BI, OJK, banks, and customs will prepare the systems, and we will actively socialize this policy to stakeholders," Airlangga said.

The rule applies to all exporters, including state-owned enterprises, aligning Indonesia's export foreign exchange retention practices with those of regional peers like Malaysia and Thailand, which have similar requirements.

Incentives for Exporters

To encourage compliance, the government will offer tax exemptions and financial benefits for exporters who retain their foreign exchange earnings domestically.

Firstly, Exporters will enjoy a 0% income tax on interest income from foreign exchange placements in designated financial instruments, compared to the regular 20% tax rate. “For regular placements, the tax rate is 20%, but for [export foreign exchange earnings], it will be exempted or 0%,” Airlangga emphasized.

Second, exporters can use their retained foreign exchange as collateral for back-to-back loans in rupiah, either through commercial banks or the Indonesia Investment Authority (LPI), to meet their domestic funding needs.

Third, retained foreign exchange earnings can serve as underlying assets for currency swaps between exporters and banks or for foreign exchange swaps with Bank Indonesia to secure rupiah liquidity.

 

Industry Scope

The regulation targets exporters in sectors such as mining and coal, palm oil, fisheries, and forestry, while excluding oil and gas exporters. The retained foreign exchange can be converted into rupiah to stabilize the currency and provide additional dollar liquidity without directly intervening in monetary policy or interest rates.

“This measure is designed to reduce rupiah volatility while supporting exporters’ operational needs,” Airlangga explained.