JAKARTA: Indonesia's central bank on Thursday instructed private firms to hedge more of their foreign debt to limit growth of offshore borrowings and reduce risks to the rupiah.
A new regulation, to be effective Jan. 1, requires companies to hedge 20 percent of their external debt due within 3-6 months that has not been covered by their current foreign-exchange assets.
Firms must also have additional 20 percent of their foreign exchange needs three months before their debt matures, said Juda Agung, executive director of the department of economic and monetary policy at Bank Indonesia (BI).
The central bank is also requiring private firms to have liquidity ratios of 50 percent in 2015 and 70 percent in 2016.
BI Governor Agus Martowardojo told reporters "we're facing risks, and a crisis could come sooner than we thought. It (capital outflow) generally happens if we're perceived as reactive instead of proactive. We must be seen as proactive, that we know our problems and we know what to do."
Private external debt, amounting to $156.2 billion at the end of August, accounted for more than half of Indonesia's external debt. It has almost doubled since 2010.
The rupiah has been one of Asia's most volatile currencies this year, raising the risk of currency mismatch for firms that borrow in foreign currencies and get their income in rupiah.
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