Jakarta. Indonesia’s plan to further tighten mandatory repatriation rules for foreign-currency earnings from natural resource exports is drawing fresh criticism, with industry groups and economists warning that the policy could raise business costs without delivering meaningful gains for the rupiah or foreign exchange reserves.

The government is preparing to require export proceeds from natural resource shipments to be deposited exclusively in state-owned banks, a move that would build on existing foreign exchange retention rules. However, the approach risks overregulation, particularly as evidence of its effectiveness remains mixed.

Since March 2025, Indonesia has required natural resource exporters to keep all foreign-currency export earnings domestically for at least 12 months, a policy intended to boost dollar supply and stabilize the rupiah. Exporters are currently allowed to convert only 50% of those earnings into rupiah, down from a previous 100% cap, while firms with foreign exchange proceeds exceeding $250,000 are subject to the mandatory deposit requirement. The government is expected to finalize the tighter rules in a regulation to be issued later this week.

However, the impact of the existing policy on foreign exchange growth has so far been limited.

University of Indonesia (UI) economist Jahen Rezki said the retention policy has yet to produce measurable exchange-rate gains, noting that the rupiah has continued to weaken.

“If the question is whether the foreign exchange lock-up rule has stabilized the rupiah, the answer so far is no,” Jahen said. 

The rupiah hit a record low of Rp 16,985 per dollar on Jan. 20. Based on JISDOR reference rates from Bank Indonesia, the rupiah traded in a range of Rp 15,092–Rp 16,458 per dollar throughout 2024, reflecting relatively controlled depreciation. In 2025, the entire trading range weakened to between Rp 16,109 and Rp 16,943 per dollar. Bank Indonesia has said it aims to keep the rupiah around Rp 16,500 per dollar this year.

The Indonesian palm oil industry association, or Gapki, has previously indicated it could accept restrictions limiting deposits to state-owned banks. Its main concerns, however, lie in the size of the retained portion and the duration of the mandatory parking.

Gapki chairman Eddy Martono told the Jakarta Globe on Thursday that operational expenditures in the palm oil sector exceed 50% of retained export proceeds.

“We could use the deposits to engage in back-to-back loans, but that would come with interest. This will translate into additional costs,” Eddy said.

He added that Bank Indonesia already operates a real-time foreign exchange monitoring system, SiMoDis, which he said was “more than enough.” The system automatically detects whether exporters have parked their earnings domestically, with non-compliance risking the loss of export permits. Gapki has urged the government to lower the mandatory retained portion.

The Indonesian banking association (Perbanas) has also acknowledged that some private banks have asked the government to review the policy, citing concerns over exclusivity for state-owned lenders.

Economist Mervin Goklas warned that tighter controls could introduce opportunity costs if exporters perceive reduced flexibility in managing revenues.

“Exporters often need foreign currency for imported inputs or risk management. Without incentives, this policy could create opportunity costs rather than genuine repatriation,” Mervin said, adding that investor sentiment could weaken if flexibility is constrained.

More Pragmatic
UI professor Telisa Falianty said the revised framework is more pragmatic than earlier versions, particularly after lowering the rupiah conversion cap from 100% to 50%, which could improve compliance.

“Placing the proceeds in state-run banks makes compliance easier to trace,” Telisa said, noting that the previous framework allowed exporters to place funds in private banks.

She added that it could take up to three years to determine whether the policy meaningfully boosts Indonesia’s dollar supply. Foreign exchange reserves rose by about 0.5% from $155.7 billion at the end of 2024 to $156.5 billion by December 2025. Telisa called for complementary measures, including tax incentives, competitive exchange rates, and lower transaction costs, to ease pressure on cash flows in capital-intensive sectors.

Indonesia is not alone in adopting repatriation measures. Malaysia requires exporters to repatriate export proceeds in full within six months of shipment, while Thailand has recently raised its repatriation threshold tenfold to $10 million per transaction to ease pressure on the baht.

Indonesia estimates its annual exports could reach $270 billion, with roughly 60% denominated in foreign currencies.

Under earlier arrangements, exporters formally complied by placing funds in special accounts, but authorities later found that large portions were converted into rupiah, routed through smaller banks, then reconverted into foreign currency and transferred offshore — undermining efforts to strengthen foreign exchange reserves and support the rupiah.