'Inflation could exceed target'<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Minister of Finance Boediono said on Thursday that full-year
\ninflation could reach 7 percent, exceeding the government's
\ntarget, mainly due to the fall of the rupiah against the U.S.
\ndollar.<\/p>\n
He said the drop in the value of the rupiah against the U.S.
\ndollar had pushed up the price of goods because imported raw
\nmaterials were now more expensive.<\/p>\n
The government has projected inflation this year at 6.5
\npercent. It also assumed an average exchange rate of Rp 8,600
\nagainst the U.S. dollar.<\/p>\n
But the rupiah has been under pressure due to a combination of
\npolitical jitters at home during the current election year and
\nrising U.S. interest rates, which have prompted investors to
\nswitch to dollar-based assets.<\/p>\n
The rupiah has declined by about 6 percent since the start of
\nthe year. The rupiah ended Thursday flat at Rp 8,960 as most
\nplayers remained on the sidelines ahead of the second round of
\nthe presidential election on Sept. 20.<\/p>\n
Inflation over the past two months has been accelerating. In
\nJune, the consumer price index rose to 6.8 percent on an annual
\nbasis as prices of most goods and services increased amid the
\nfalling rupiah.<\/p>\n
The stronger inflationary pressure could force the central
\nbank to increase its benchmark interest rate, a move that would
\neventually add to the burden on the state budget in servicing the
\ngovernment's huge domestic debt.<\/p>\n
The higher rate would in turn also make it more difficult for
\nbanks to extend loans to the corporate sector.<\/p>\n
Bank Indonesia has been determined to control inflation, seen
\nas one of the key conditions for accelerating the economic
\nrecovery. The country, in the wake of the late 1990s financial
\ncrisis, suffered from hyperinflation.<\/p>\n
Elsewhere, Boediono said consistency and nondiscrimination in
\ngovernment policies were key factors in attracting new direct
\ninvestment.<\/p>\n
\"What are needed are consistent and nondiscriminative
\npolicies. This will help reduce the risk of investing in
\nIndonesia,\" he said.<\/p>\n
He was commenting on an earlier report from the Investment
\nCoordinating Board that approved foreign direct investment
\ndeclined by 34 percent to about US$3.05 billion in the fist half
\nof this year compared to the same period last year.<\/p>\n
Boediono also said further reform of the judicial, tax and
\nexcise sectors, as well as improving good governance, were
\nequally important for improving the investment climate.<\/p>",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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