Stronger monetary measures urged to curb inflation<\/p>\n
JAKARTA (JP): The government should pursue stronger monetary
\nand fiscal measures to control inflation and create more
\nemployment to prevent possible social chaos, University of
\nIndonesia economists said yesterday.<\/p>\n
Anton H. Gunawan and Sri Mulyani Indrawati said the government
\nshould simultaneously solve offshore debt problems, restore the
\nhealth of the banking sector and reduce various distortions in
\nthe production sector to shore up the rupiah.<\/p>\n
While speaking at a university symposium on \"caring about the
\nfuture of Indonesia\", they said monetary policy alone had lost
\nits effectiveness to control the inflation rate and strengthen
\nthe rupiah.<\/p>\n
\"Monetary policies have become redundant during the current
\ncrisis, so policies to control inflation should be more on the
\nfiscal side,\" Anton said in a paper he prepared jointly with Sri
\nMulyani.<\/p>\n
Sri was not at the meeting yesterday because she is performing
\na pilgrimage to Mecca.<\/p>\n
Anton predicted that efforts to control inflation by raising
\ninterest rates to high levels would not be effective because
\ncurrent inflation had been caused more by supply rather than
\ndemand factors.<\/p>\n
\"One thing the government should understand is that the
\ncurrent high inflation rate is not merely caused by high growth
\nof the money supply and economic liquidity.<\/p>\n
\"The high inflation stems more from supply factors, like
\nimported inflation, the stoppage of production processes and cuts
\nin distribution channels,\" Anton said<\/p>\n
Fiscal measures to control inflation could be pursued by
\nsubsidizing the importation of basic staples and maintaining fuel
\nsubsidies for some time, he said.<\/p>\n
Economist Ari Kuncoro agreed and said the government should
\nsubsidize the import of raw materials for the production of basic
\nnecessities, including medicines.<\/p>\n
\"However, all subsidies should be viewed as emergency
\nmeasures. They cannot be maintained for a medium or longer-term
\nperiod,\" Ari said.<\/p>\n
\"If they are maintained for any longer than that, it would
\nmake the economy inefficient,\" he added.<\/p>\n
The economists said the government did not have enough funds
\nfor long-term subsidies because domestic income taxes would not
\nincrease and could even decrease.<\/p>\n
Anton suggested that the government transfer all of the
\ncountry's non-budgetary funds managed by various foundations
\nunder President Soeharto to the state budget.<\/p>\n
The government would have more resources to finance its
\nspending, especially on badly needed subsidies, he said.<\/p>\n
He said the government could use the trillions of rupiah from
\nthe non-budgetary funds to create more employment through a
\nsocial safety net scheme.<\/p>\n
He proposed that the government allocate certain funds, like
\nthose used to help undeveloped villages, to create employment.<\/p>\n
The government should involve more non-governmental
\norganizations and local people in selecting and running the
\nprojects to make them productive, Anton said.<\/p>\n
\"And most importantly, the decision making process and the use
\nof funds must be made as transparent and accountable as
\npossible,\" he said.<\/p>\n
As for efforts to strengthen the rupiah, Anton suggested that
\nthe government simultaneously solve offshore debt problems,
\nrestore the health of the banking sector and reduce various
\ndistortions in the production sector.<\/p>\n
\"Therefore, the essence of the International Monetary Fund
\nreform package should cover all three elements because all of the
\nthree are vital to the strengthening of the rupiah,\" Anton said.<\/p>\n
The rupiah has lost about 70 percent of its value against the
\nU.S. dollar since early July.<\/p>\n
Anton warned that if the government again failed to implement
\nthe reforms, confidence in the current administration would never
\nreturn.<\/p>\n
He said the people had already been disappointed by rent-
\nseeking activities hidden behind the State Logistics Agency and
\nmanaged clove trading, which the government has recently tried to
\ndefend in its negotiations with the IMF.<\/p>\n
Goodwill from the government to abolish all practices of crony
\ncapitalism is needed to win the hearts of the people to restore
\nconfidence, he said. (rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/stronger-monetary-measures-urged-to-curb-inflation-1447893297",
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