Bank Indonesia Launches New Instrument to Attract Export Earnings Back Home

rupiah and us dollar
rupiah and us dollar

Indonesia’s central bank, Bank Indonesia (BI), has officially implemented a new monetary operation instrument, the Term Deposit Valas Devisa Hasil Ekspor (TD Valas DHE), as of March 1, 2023. What is the purpose of this new policy?

The purpose of this new instrument is to attract back foreign exchange earnings from exports that have been parked overseas, especially in Singapore.

According to Bahana Sekuritas, BI’s TD Valas DHE offers a foreign currency deposit interest rate ranging from 4.6% to 5.2% with a maturity of one to six months, higher than the interest rates provided by Singaporean banks, which range from 4.12% to 4.68%.

The rules governing TD Valas DHE are stipulated in PBI No. 24/18/PBI/2022 on the Second Amendment to PBI No. 21/14/PBI/2019 concerning Foreign Exchange Earnings and Import Payment.

TD Valas DHE is a foreign currency deposit placement instrument for foreign exchange earnings by exporters through banks, which are directly forwarded to Bank Indonesia.

The higher the amount of deposit, the more negotiating power the depositor has in terms of interest rate. Moreover, the longer the maturity, the higher the interest rate.

BI Governor Perry Warjiyo explained during the CNBC Indonesia Economic Outlook 2023 event that if an exporter parks their foreign currency for only one month, they will receive a lower interest rate compared to an exporter who parks their funds for three months or more.

The interest rate offered will also be determined based on the value or amount of foreign exchange earnings deposited in a special account at a bank in Indonesia.

“We will provide competitive interest rates to our exporters compared to those offered overseas,” said Governor Perry Warjiyo during the CNBC Indonesia Economic Outlook 2023 on Tuesday (28/2/2023), as quoted.

Not only will exporters be given incentives, but banks that successfully attract exporters to park their foreign exchange earnings will also be given an agent fee.

Moreover, the foreign exchange received by banks will not be counted as Third Party Funds (DPK), thus not being included in the Minimum Mandatory Giro (GWM) in foreign currency and the Macroprudential Intermediation Ratio (RIM).

The TD Valas DHE instrument facilitates the placement of foreign exchange earnings by exporters with Bank Indonesia through 20 appointed banks.