Govt vows to lower inflation
Govt vows to lower inflation
JAKARTA (JP): The government, concerned over the high rate of inflation in past years, pledged yesterday to make concerted efforts to keep the inflation rate at a maximum of five percent in the coming years, in order to improve the competitiveness of Indonesia's exports.
Minister of Finance Mar'ie Muhammad said that the government would maintain its cautious monetary policies to keep the inflation rate low.
The inflation rate was recorded at 9.53 percent in both 1990 and 1991 before falling to 4.53 percent in 1992. It surged back up in 1993, to 9.77 percent, and reached 9.24 percent in 1994.
"The government agrees about the need for a further lowering of the inflation rate to below five percent," he told a plenary session of the House of Representatives.
The finance minister was replying to the House's questions on the 1995-1996 state budget during the plenary session, which was chaired by House Deputy Speaker Surjadi.
Mar'ie said lowering the inflation rate is part of the government's strategy for curbing the expected stronger pressure on the country's current account deficit in 1995-1996 fiscal year, which will begin in April.
The low inflation rate is crucial, not only for promoting the country's exports, but also as a means of discouraging imports, the minister said.
"In addition, a lower inflation rate will become a strong stimulus to the growth of foreign investment," he said.
Bank Indonesia, the central bank, plans to limit the growth of the money supply to 20 percent in 1995-1996 in a bid to reduce growing inflationary pressure, while sustaining economic growth at seven percent.
The central bank has also reduced the target for the growth of bank credits to 19 percent in 1995-1996, down from the 22 percent projected for this fiscal year, in order to prevent the economy from overheating.
Deficit
House members cautioned the government over mounting pressure on the country's current account deficit in the next fiscal year.
They said that imports, which are estimated to grow faster in the coming years as the consequence of faster growth in investment, will put stronger pressure to the country's current account deficit.
The current account deficit, which is projected to grow further to US$4.09 billion in 1995-1996, compared with an estimated $3.56 billion this fiscal year and $2.94 billion in 1993-1994.
House members said that the current account deficit could grow even more quickly than projected if the growth of exports is slow.
According to the Central Bureau of Statistics, Indonesia's exports during the first eight months of 1994 increased by 5.8 percent to $25.51 billion from $24.11 billion in the same period of 1993, while imports rose 11.8 percent to $20.15 billion from $18.01 billion.
Minister of Industry Tunky Aribowo said last week that the growth of non-oil exports, which are expected to contribute about three quarters to the country's export revenues, might have reached only around 11-12 percent last year, far lower than the government's target of 17 percent.
Finance minister Mar'ie said yesterday that managing the rupiah at a realistic level is also another important strategy in stimulating exports.
"The realistic value of the rupiah will promote the competitive edge of Indonesia's products overseas," he said.
The minister said the government also promised to improve coordination in the management of its foreign debt to ensure that loan repayment will remain at the safe level.
President Soeharto unveiled the draft budget for 1995-96 early this month, which is estimated to balance at Rp 78.02 trillion ($36.28 billion) for both revenues and spending, an increase of 11.9 percent of that in 1994-95.(hen)