Rupiah's tumble seen to shore up inflation

JAKARTA (JP): The rupiah's sharp depreciation against the U.S. dollar will result in a higher inflation rate, State Minister of National Development Planning Ginandjar Kartasasmita said yesterday.

Speaking to journalists after attending the independence day ceremony at Merdeka Palace, Ginandjar said the cost of several products with high import contents would go up as a result of the strengthening dollar.

"I would say inflation will rise. It's impossible for us to say this year's inflation will not be affected (by the weakening rupiah)," Ginandjar said.

Following repeated attacks on the rupiah, the monetary authority floated the currency last Thursday. The move weakened the rupiah to an all-time low of 2,960 Friday.

Ginandjar said the government was capable of calming the turbulent market as it had dealt with the aftermath of rupiah devaluations in the past.

"We hope the situation will stabilize again soon and then we'll make every effort to contain the inflation rate," Ginandjar said.

The government has targeted an average annual inflation rate of about 5 percent for between April 1994 and March 1999.

Indonesia's inflation rate reached 6.47 percent in 1996 compared to 8.64 percent the previous year.

Ginandjar said the weakening rupiah was a blessing in disguise for Indonesia's non-oil exports as it would make Indonesia's products more competitive in dollar terms.

He echoed President Soeharto's speech before the House of Representatives Saturday, calling on small-scale enterprises to make use of the weaker rupiah to boost exports.

"Small- and medium-scale enterprises are more flexible. And I think they would be prepared to make use of this situation to drive exports," the minister said. (rid)