Rupiah's tumble seen to shore up inflation

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)