Jakarta to curb luxury imports

JAKARTA - Indonesia says it will curb imports of luxury goods including cars and take other steps to bolster its finances amid a slumping currency and stock market.

Indonesia, along with countries such as Thailand, Malaysia and India, has been buffeted by an exodus of cash from its financial markets as improving economic prospects in the US and Europe reverse the tide of money that swept into developing nations the past few years.

Among the measures announced on Friday, the government would relax mineral export quotas and streamline the investment permit process, said Hatta Rajasa, Coordinating Minister for the Economy.

He said the government would also increase the import tax on luxury cars and some branded products, provide tax incentives for investment in agriculture and metal industries and seek to reduce oil imports.

The moves aim to shore up Indonesia's currency and bolster confidence that the country can pay its bills by limiting outflows of money and encouraging inflows.

That in theory should reduce Indonesia's current account deficit, which largely reflects that it is importing more than it exports.

"With these steps, the current account deficit in the third and fourth quarters is expected to decrease while economic growth could be maintained," Rajasa said.

The rupiah has sunk to its lowest level in over four years, reaching 11,020 to the US dollar on Friday. The Jakarta Composite Index was flat on Friday, after sliding 8.7% in the first four days of the week.

Bank Mandiri market analyst Reny Eka Putri said the Indonesian central bank is also expected to intervene to prevent the rupiah from losing more value.

Indonesia's economy last year grew 6.5%, its fastest growth since the 1997-98 Asian financial crisis. But growth slowed to 5.8% in the second quarter of this year.

The country has also experienced rising inflation, which hit 8.6% in July, after the government cut fuel subsidies. The unpopular move hiked pump prices by up to 44%.

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