Indonesia to unveil policy package today to help economy and rupiah, which hit record low to Singdollar on Wednesday

A bank employee displaying bundles of Indonesian rupiah notes in Jakarta on Aug 25.
A bank employee displaying bundles of Indonesian rupiah notes in Jakarta on Aug 25. PHOTO: AFP

JAKARTA (REUTERS) - Indonesia on Thursday will unveil a policy package intended to prop up the rupiah, which hit another fresh 17-year low against the US dollar, and boost investment at a time Southeast Asia's largest economy faces its weakest growth in six years.

Mr Darmin Nasution, the coordinating minister for economics, announced the package was coming after he met President Joko Widodo.

Central bankers across emerging markets are being forced into action to stem falls in their currencies, especially after China allowed its yuan to weaken to four-year lows.

The package is expected to add to tax incentives announced on Monday aimed at promoting pioneering industries including oil refineries and infrastructure.

Indonesia's policy package "relates to the real sector. This relates to finance and (also) relates to deregulation, new policies (and) tax holidays," Mr Nasution told reporters.

He noted that most of the new policies were aimed at strengthening the rupiah, and were expected to come into effect next week.

"First it will make economic activity smoother. Secondly it will push for foreign currency to come in," Nasution said.

The package comes two days after Bank Indonesia (BI) cut its GDP growth outlook for this year and next year On Thursday, BI Governor Agus Martowardojo said on Thursday he expected 2015 economic growth to be 4.89 per cent, the weakest since 2009.

BI on Thursday was spotted directly selling dollars, not though agent banks, to lift the rupiah, traders said.

The unusual move indicated strong determination of the authority to support the second-worst performing Asian currency so far this year by showing its presence in the market, traders said.

The rupiah made its first gains on Thursday after an eight-day slide to 17-year lows, hitting a session high of 14,020 to the US dollar shortly after the announcement about a coming package. For the year, the rupiah has shed about 12 per cent against the US dollar.

The rupiah also recovered after hitting an all-tim low of 10,110 to the Singapore dollar on Wednesday. It was trading higher at 10,007.49 to the Singdollar as at 12:45 pm on Thursday, up from its close of 10,110.17 on Wednesday.

Indonesia's large current account deficit and the global slump in commodities prices have also pressured the rupiah.

The benchmark Indonesia stock index rose more than 3 per cent on Thursday, heading for its biggest single-day climb in two years.