Govt denies manipulating inflation rates

Govt denies manipulating inflation rates

JAKARTA (JP): The chairman of the Central Bureau of Statistics
(BPS), Sugito Suwito, denied yesterday that the government has
manipulated the computation of the country's inflation rates.

Sugito said here that the existing method for the calculation
of inflation rates is too complicated to be manipulated, given
the wide range of goods and services included in the formula.

The number of goods and services and their respective weights
in the inflation computation are based on household consumption
patterns, which have been set through an intensive survey on
costs of living, he said.

"Engineering inflation rates by using only goods with stable
prices as the basis for calculating the consumer price index
(CPI) would, therefore, be impossible," he told a seminar on the
impact of food price fluctuations on the country's inflation
rates.

He did, however, acknowledge that the existing inflation
formula needs updating, to provide more representative inflation
figures.

The current system for calculating the CPI is based on the
prices of 224 consumer goods and services in the capitals of the
country's 27 province, including Dili in East Timor.

The government successfully checked the inflation rates below
10 percent in the last four years despite sharp increases in the
prices of certain products such as cement and other building
materials during those years.

Despite this success, the government was often charged of
having "engineered" the inflation rates, which, according to
analysts, should have been logged at over 10 percent.

The annual inflation rate was recorded at 9.53 percent in both
1990 and 1991, at 4.94 percent in 1992, at 9.77 percent in 1993,
at 9.24 percent in 1994 and at 8.64 percent in 1995.

Sugito said that the rise in foodstuff prices remained the
dominant factor for the inflation rate. Last year, for example,
the increase in foodstuff prices contributed 4.37 percentage
points to the inflation rate, as compared to the 1.71 percentage
points contributed by the housing sector, 0.69 percentage points
by the clothing sector and the 1.87 percentage points by other
goods and services.

He said that the increase in the rice price and related
products alone contributed 0.9 percentage points.

Chairil A. Rasahan, a member of the Association of
Agricultural Experts (Perhepi), also questioned the validity of
the current system of inflation rate computation.

Speaking at the seminar, held by Perhepi and the Jakarta
branch of the Association of Indonesian Economists (ISE), Chairil
said that the existing computation system does not really
accommodate the true changes in the prices of goods and services.

He acknowledged that the computation system covered most
important household consumption items but pointed out that
services used by the government are not included.

Chief of the National Logistics Agency, Beddu Amang, also said
yesterday that the present system of computation has yet to
include the changes of prices in the monetary sector.

Sugito said BPS plans to expand the number of goods and
services used in determining the CPI to between 300 and 400 items
in order to ensure a more representative inflation figure.

Sri Mulyani, a lecturer at the University of Indonesia, said
at the seminar that the country's inflation was caused by both
demand and supply factors.

"The impact of the supply factor is, however, much stronger
than the demand side," said Sri, who is also a researcher at the
research institute run by the Economics School of the University
of Indonesia.

According to one study from the research institute, cost-push
factors accounted for 68.4 percent of overall inflation, while
the remaining 31.6 percent were due to demand-pull factors. (hen)

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