Ministers to keep inflation, interest rates in check

Ministers to keep inflation, interest rates in check

Slamet Susanto and Urip Hudiono, The Jakarta Post, Yogyakarta/Jakarta

The newly appointed economics and finance ministers shall be
focusing their attention on reviving Indonesia hard-gained
macroeconomic stability, currently under serious threat amid high
inflation and interest rates, while at the same time encouraging
investment in order to boost growth and job creation.

Boediono, the soon-to-be installed Coordinating Minister for
the Economy, acknowledged on Tuesday that current inflation and
interest rates were too high, and that they posed a danger to the
whole economy.

Widely credited for stabilizing the macro economy when serving
as finance minister during the administration of president
Megawati Soekarnoputri, Boediono said he would make tackling the
problems of high inflation and interest rates among his
priorities.

"I'm going to cooperate with the monetary authorities (Bank
Indonesia) to determine ways to deal with the problems (of high
inflation and interest rates)," he said.

Inflation was at a six-year high as of November at 17.17
percent -- a multiplier effect from the government's move in
increasing domestic fuel prices in October by an average of 126
percent.

Echoing Boediono was the new Minister of Finance Sri Mulyani
Indrawati, who said in Jakarta that her focus would be to regain
macroeconomic stability by managing fiscal policy in a "more
prudent way".

"My priority is to maintain macroeconomic stability ... while
also promoting investment for higher economic growth, poverty
eradication and job creation," Sri Mulyani said.

Sri Mulyani and Boediono entered the Cabinet as part of a
reshuffle announced a day earlier by President Susilo Bambang
Yudhoyono, a move designed to improve the Cabinet's economic team
that has come under fire in recent months.

Sri Mulyani was previously State Minister for National
Development Planning.

Sri Mulyani admitted the current high inflation environment
would eventually slow down economic growth for this year and
next, especially when investment was yet to pick up speed as
expected.

"If we can record investment growth of 10-12 percent next
year, that may help to boost GDP growth to close to 6 percent,"
Sri Mulyani said.

The figure is lower than the official government target for
next year's economic growth of 6.2 percent.

To achieve 6.2 percent growth next year, Sri Mulyani added,
expansion in domestic consumption must be kept above 3.5 percent.

The slowing economy was also apparent this year, with the
economy now expected to grow by 5.5 percent, slower than the
official target of 6 percent.

The central bank, in a move to help curb inflation, on Tuesday
hiked its key interest rate by 50 basis points from 12.25 percent
to 12.75 percent, the sixth increase since July.

High interest rates are posing a problem for the economy as
the cost of lending -- one major source of funding for business
activity -- is becoming more expensive.