This will be the norm going forward
Reserve currency will not be allowed to leave
This is something a few of us talked about few years ago https://t.co/FFDKZ6umig— David Lee (@DavidLe76335983) July 14, 2025
A shift is underway in Indonesia, with the nation moving decisively to exert greater control over its vast gold resources. This represents a significant deepening of Jakarta’s resource nationalism philosophy, already keenly observed in other mineral sectors. The central objective is to fortify the country’s currency reserves and inject more value directly into its domestic economy by reining in raw material outflows. The implications are substantial, resonating from global commodity markets to the balance sheets of international mining behemoths operating on Indonesian soil.
The cornerstone of this new posture is a series of interconnected regulations enacted by the Indonesian government. On March 1, 2025, Government Regulation No. 8 of 2025 took effect, dramatically altering the landscape for natural resource exporters. This rule demands that a full 100% of export proceeds from certain mining, plantation, forestry, and fishery products must now be held within the Indonesian banking system for a minimum of 12 months. This is a significant escalation from the previous requirement, set in July 2023 by Government Regulation No. 36 of 2023, which mandated only 30% retention for three months. This strict onshoring requirement means less capital immediately flowing out of the country, theoretically providing a stronger cushion for the Indonesian rupiah and more leverage for the central bank, Bank Indonesia, in managing monetary stability.
Furthermore, April 2025 saw the Indonesian government raise royalty rates for several key minerals, including gold. Government Regulation No. 19 of 2025 now sets new royalty tariffs. For gold, royalty rates have climbed, reflecting a progressive scheme designed to ensure the state captures a larger portion of resource wealth, particularly when commodity prices are elevated. Deputy Minister of Energy and Mineral Resources Yuliot Tanjung stated in April 2025 that for minerals, the highest tariff is around 7%. This echoes Minister Bahlil’s earlier sentiment that “It’s time for the state to claim a more appropriate share.” Industry groups have voiced concerns, citing increased operational costs and potential impacts on production and investment plans. However, the government’s stance is resolute, prioritizing national economic benefit. As of July 8, 2025, the House has also approved new export duties on gold and coal to further boost state revenue.
The grander strategy involves a ban on exporting raw minerals, pushing mining companies to process materials domestically rather than shipping raw ores abroad. This policy has already seen notable success in the nickel sector, where similar restrictions between 2014 and 2023 led to a remarkable surge in domestic processing capacity, from just 2 smelters to over 43 facilities. While copper concentrate export bans were implemented in mid-2023, Amman Mineral’s special permission expired in December 2024. Their new smelter produced its first copper cathode by late March 2025, though it has not yet reached full capacity due to technical issues. As of July 8, 2025, the Indonesian government is considering exemptions to the copper concentrate export ban, with the Minister of Home Affairs, Tito Karnavian, reportedly seeking possibilities to allow exports while smelters are still being completed. This indicates a measured approach, allowing companies time to adapt and develop domestic processing infrastructure, though the overall trajectory remains towards domestic value addition.
Indonesia currently ranks as the fifth largest gold producer globally, with significant reserves concentrated in areas like Grasberg in Papua. In February 2025, Indonesia’s gold reserves were reported at 7.220 billion US dollars, an increase from 7.068 billion US dollars in January 2025. The overall foreign exchange reserves of Indonesia, which include gold, saw a slight rise to 152.6 billion US dollars by the end of June 2025, up from 152.5 billion US dollars in May 2025. This amount is equivalent to covering 6.4 months of imports, or 6.2 months if government foreign debt payments are also included, comfortably exceeding the international adequacy standard of approximately three months of imports. By clamping down on gold exports and mandating the retention of proceeds within its banking system, Jakarta is not only looking to buffer its currency against global volatility but also to foster a more robust domestic industrial ecosystem around its mineral wealth, aiming for job creation beyond mere extraction, higher tax revenues from value added products, and the transfer of critical processing technology.
Sources:
https://tanahair.net/government-launches-new-regulation-on-coal-mineral-royalties/
https://www.ceicdata.com/en/indicator/indonesia/gold-reserves
https://tradingeconomics.com/indonesia/foreign-exchange-reserves
https://www.idnfinancials.com/news/55684/foreign-reserves-rise-0-06-in-june-2025
https://discoveryalert.com.au/news/indonesia-copper-ban-2025-economic-impact/
