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Analysis: BI offers support measures as DHE lock-up extends to one year
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Bank Indonesia Governor Perry Warjiyo (Antara/Muhammad Adimaja)
T
he government has extended the mandatory lock-up period for export earnings from natural resource commodities (DHE) from three months to one year. This policy aims to bolster Indonesia’s foreign exchange (forex) liquidity amid ongoing economic uncertainties. However, the move has faced strong resistance from businesses, which argue that it significantly increases their financial burden. The extended lock-up period is set to take effect around March 1 with the issuance of Government Regulation (PP) No. 8/2025.
The policy had been under government discussion for months, as authorities sought to balance economic stability with the concerns of exporters. A major concern was that the extended lock-up period would restrict exporters' access to working capital. To address this, the regulation includes provisions allowing businesses partial access to their locked-up earnings. Exporters will be permitted to convert a portion of their DHE into rupiah to cover operational costs. Additionally, unconverted DHE can be used for tax payments, foreign-currency dividend distributions, procurement of unavailable domestic goods and services, and repayment of foreign debts.
Despite these concessions, opposition remains strong. Exporters previously expressed concerns over the three-month lock-up, and the extension has only heightened their apprehensions. The Indonesian Employers Association (Apindo) has pointed out that the special term accounts designated for locked-up DHE offer low interest rates. Under the previous regulation, PP No. 36/2023, Bank Indonesia (BI) provided term deposits with interest rates of approximately 5 percent, whereas exporters often face borrowing costs of 8 to 11 percent due to restricted cash flow.
In response, BI has introduced new financial instruments, Sekuritas Valas Bank Indonesia (SVBI) and Sukuk Valas Bank Indonesia (SUVBI), which exporters can use to deposit their locked-up DHE. These instruments are designed to offer more competitive returns and greater flexibility. BI has also committed to offering flexible tenors, provided that DHE remains in Indonesia for the mandated one-year period. Currently, SVBI and SUVBI are available in one-, three- and six-month tenors, but BI plans to introduce a one-year tenor option specifically for DHE deposits under this policy.
Further incentives align with PP No. 22/2024, which governs the taxation of income from DHE deposits. According to Article 4, Paragraph 2, deposits in monetary instruments with tenors exceeding six months will benefit from a 0 percent income tax rate. This incentive is intended to encourage compliance with the lock-up requirement while mitigating exporters' financial losses due to lower deposit interest rates.
The decision to extend the DHE lock-up period was not taken lightly. Although discussions had been ongoing for months, the policy was finalized in response to growing geopolitical pressures. A key factor was the evolving global trade landscape, particularly the United States' shift toward protectionist policies and its tariff disputes with China. The resulting trade tensions have impacted Indonesia’s two largest trading partners, prompting the government to strengthen forex reserves as a safeguard against external economic shocks.
By extending the DHE lock-up period, the government aims to enhance forex reserves and stabilize the rupiah. Preliminary estimates suggest that Indonesia’s forex reserves could rise from US$13 billion at the end of 2024 to $50 billion by the end of 2025. Maintaining robust forex reserves is seen as a critical step in protecting economic sovereignty and ensuring financial stability.
