Sat, 03 Apr 2004

Govt won't revise inflation target despite price hikes

The Jakarta Post, Jakarta

The government's 6.5 percent inflation target for this year would still be attainable despite hikes in the prices of liquefied petroleum gas (LPG) and local telephone rates, Minister of Finance Boediono said.

"A hike in one or two commodities will not necessarily trigger price hikes in other commodities. In fact, the price of other commodities or services may go down," Boediono said at a seminar on the economy.

He said the government would press ahead with several key economic reform programs to help maintain the current hard-gained economic stability, including inflation. He did not elaborate what these programs were.

State oil and gas firm PT Pertamina last month raised the price of LPG by 5.3 percent to Rp 3,000 (35 U.S. cents) per kilogram to cover rising production costs. The company has said it would raise the price again later this year in order to break even.

Meanwhile, state telecommunications company PT Telkom raised its local phone rates on Thursday by more than 28 percent, but cut down long-distance call rate by 20 percent.

The Central Statistics Agency (BPS) announced on Thursday on- year inflation in March increased by 0.36 percent as prices of foods and other commodities increased during the general election campaign period. Year-on-year inflation during the month was recorded at 5.11 percent, higher than 4.6 percent posted in February.

Inflation during the first three months of the year reached 0.99 percent, BPS said.

The 2004 state budget assumes an inflation rate of 6.5 percent for the full year.

The economy has enjoyed a relatively benign inflation rate during the past few years after suffering from hyperinflation during the late 1990s in the wake of the economic crisis.

The weak inflation environment has allowed the central bank to cut domestic interest rates, ease the burden of the government in servicing its huge domestic debts, and improve the people's purchasing power. Domestic consumption has been the main engine of the country's economic growth during the past couple of years.