Finance Minister ready to fight rising inflation

JAKARTA (JP): Minister of Finance Mar'ie Muhammad declared war on inflation yesterday, citing its climb to more than five percent during the first five months of this year.

"We have to fight all out to curb the rise in the inflation rate," the minister told a hearing with the budgetary commission of the House of Representatives.

Mar'ie said that efforts to curb the inflation rate would be made through a tightening of monetary policy.

Other efforts, the minister said, would include stricter controls on retail prices.

The minister did not, however, provide details of the proposed monetary measures, nor did he say at what level the government hoped inflation to be checked.

The inflation rate climbed by another 0.49 percent last month, bringing the rate to 5.24 percent for the months January to May, more than a half of the 9.24 percent recorded last calender year. Last month's inflation rate was far lower than the 1.69 percent recorded in April, 0.57 percent in March, 1.31 percent in February and 1.16 percent in January.

However, economists have predicted that inflationary pressure will increase during the remainder of the year as a result of the current surge in paper prices and the routine increases in consumer prices before and during the Christmas holidays in December.

Economists are now saying the 1995 inflation rate could exceed the psychological barrier of 10 percent.

Target

While Mar'ie did not reveal yesterday the government's inflation target for this year, he has previously stated that the inflation rate should not exceed 10 percent.

For several years the government has been intent on keeping inflation below 10 percent.

The inflation rate dropped slightly to 9.24 percent last year from 9.77 percent in 1993. In 1992, the inflation rate dropped sharply to 4.94 percent, from 9.53 percent in 1991 and 9.53 percent in 1990, after the government introduced tight monetary policies to cool down the overheating economy.

In yesterday's hearing the finance minister acknowledged that the use of monetary instruments were not always very effective in curbing inflationary pressure.

Earlier this month President Soeharto ordered cabinet ministers to improve coordination to enable them to effectively curb the rise of prices throughout the country.(hen)