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)