Government urged to ease its grip on inflation<\/p>\n
JAKARTA (JP): The government should start easing its grip on
\nconsumer price index components because inflation has started to
\ndrop, experts said yesterday.<\/p>\n
Legislator Tadjudin Noer Said of the House Budgetary
\nCommission and economist Mari E. Pangestu of the Centre for
\nStrategic and International Studies agreed that the government's
\nsound monetary and fiscal management had helped reduce inflation
\nfor the last fiscal year.<\/p>\n
\"We have to commend the government for such a good
\nachievement, although it is still above the target of 5 percent
\nper annum for the current Five Year Development Plan,\" Tadjudin
\nsaid yesterday.<\/p>\n
The government reported earlier that inflation in the last
\nfiscal year to March 31 was 5.17 percent, the lowest since the
\n1985\/1986 fiscal year.<\/p>\n
But Tadjudin said the government needed to review the
\nachievement because it might result from an economic slump rather
\nthan from comprehensive anti-inflation measures.<\/p>\n
The 5.17 percent inflation rate did not represent real
\ninflation because Indonesia's consumer price index covered only
\nbasic needs, most of which are controlled by the government, he
\nsaid.<\/p>\n
\"The government's interventions exist in most components of
\nour consumer price index. Just take the prices of fuel, rice and
\nthe other nine basic commodities. The government has interference
\npower over them through subsidies,\" Tadjudin said.<\/p>\n
He said although some subsidies, like those for fertilizers
\nand fuel, were accounted for in the state budget, many more were
\nnot reported in the budget.<\/p>\n
The unreported subsidies include those for stabilizing the
\nprices of rice, sugar, flour, and cooking oil, which are managed
\nby the National Logistic Agency, he said.<\/p>\n
Bank Indonesia, the central bank, often disburses subsidized
\nliquidity credits to the agency for price stabilization programs.<\/p>\n
\"We are in the dark about those subsidies. But I think if the
\ngovernment removed those subsidies, inflation would have been
\nhigher than that officially recorded. Therefore, the government
\nneeds to relax its control gradually to achieve sustainable low
\ninflation in the future,\" Tadjudin said.<\/p>\n
Mari warned that the government might loosen control over fuel
\nprices after the May general election which would cause inflation
\nto rise.<\/p>\n
She predicted inflation would increase after the general
\nelections because most investors would start implementing their
\ninvestment plans, which had been put on hold until after the
\nelection.<\/p>\n
\"Investment booms like this will cause a specific dilemma for
\nBank Indonesia, especially in managing the level of bank interest
\nrates,\" Mari was quoted by Antara as saying.<\/p>\n
Although the country posted relatively low inflation last
\nfiscal year, Mari predicted interest rates would remain high
\nbecause the central bank would impose a tight-monetary policy.<\/p>\n
Deposit rates could decline further from about 15 percent a
\nyear, but lending rates would remain high at about 19 percent to
\n20 percent a year, she said.<\/p>\n
\"Bank Indonesia reckons that any tinkering with interest rates
\nwill directly influence the national banking system,\" she said.
\n(rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/government-urged-to-ease-its-grip-on-inflation-1447893297",
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