As for maintaining consumption levels, the government has allocated around Rp 104.8 trillion from the state budget to pay compensation for fuel oil and electricity subsidies in the first semester of 2022.
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Kompas Team
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BPMI SEKRETARIAT PRESIDEN
Finance Minsiter Sri Mulyani.
A number of basic commodities have seen significant price increases in recent days. The depreciation of the rupiah against the US dollar has the potential to further push up inflation.
JAKARTA, KOMPAS — Finance Minister Sri Mulyani Indrawati has underlined that the economy is still under the risk of inflation due to rising food prices. The disruption of the global supply chain amidst uncertainty and the Russia-Ukraine war has contributed to an increase in energy and food prices around the world.
“The war has disrupted the food and fertilizer supply chains. Several countries have experienced a significant increase in the price of food. This is our concern, even though the nation’s food inflation is still under control due to sufficient production," Sri Mulyani said at an international summit themed "Unlocking Role of Securitization in Developing Sustainable Finance", held in hybrid form on Wednesday (6/7/2022) in Jakarta.
In addition to keeping the inflation rate within a target range of 2-4 percent, the government and relevant authorities would also continue with its economic recovery efforts so the country could reach 4.9-5.4 percent growth this year.
As part of the efforts to maintain stable production and prices of basic commodities, Sri Mulyani said the government would continue to check the annual inflation trend, which rose 3.6 percent in the first semester of this year. In addition to keeping the inflation rate within a target range of 3.5-4.5 percent, the government and relevant authorities would also continue with its economic recovery efforts so the country could reach 4.9-5.4 percent growth this year.
“Economic growth is driven by household consumption, investment in various kinds of capacity expansion, and from the external sector. Because of this, the state budget has begun serving as an instrument to maintain consumption and investment levels," she said.
As for maintaining consumption levels, the government has allocated around Rp 104.8 trillion from the state budget to pay compensation for fuel oil and electricity subsidies in the first semester of 2022. The amount accounts for 35.7 percent of Rp 293.5 trillion in total fuel and electricity subsidies allocated for this year. The compensation is to be paid to state-owned energy holding company Pertamina and state-owned electricity company PLN.
KOMPAS/JUMARTO YULIANUS
Residents shop for basic necessities at the Cheap Market event in the yard of the South Kalimantan Trade Office, Banjarmasin, Tuesday (17/4/2018).
Meanwhile, the Trade Ministry is continuing with its close monitoring of the commodities price hike, especially ahead of Idul Adha (Day of Sacrifice). The commodities hike has contributed to increasing the inflation rate. Ministries and government agencies are continuing to work together to ensure that prices are affordable to consumers but do not hurt farmers.
According to data from the Strategic Food Price Information Center on Wednesday (6/7), the price of grade 1 meat at the national level reached Rp 138,000 per kilogram, an increase from Rp 137,000 per kilogram on 30 June. Meanwhile, the price of medium-sized shallots had increased to Rp 60,750 per kg from Rp 60,250 per kg on the previous four days.
Although the prices of a number of commodities, such as eggs and chicken had started to drop, they were still relatively high, he said.
Trade Minister Trade Zulkifli Hasan said in Jakarta on Wednesday that he had checked the prices of various commodities at a number of markets since he was appointed to the role last month. Although the prices of a number of commodities, such as eggs and chicken had started to drop, they were still relatively high, he said.
Double blow
Researcher Rusli Abdullah from the Institute for Development of Economics and Finance (Indef) said that if commodities prices were not brought under control, annual inflation could reach 5 percent this year. As of the end of June 2022, Indonesia's annual inflation rate had increased to 4.3 percent.
Indef made a number of recommendations on curbing the price hikes, including increasing domestic food production by providing incentives to farmers, increasing the use of locally made products, accelerating natural resource downstreaming, and promoting trade cooperation with “nontraditional” trading partners.
Another factor that could increase inflation further was the rupiah’s weakening against the US dollar. According to the Jakarta Interbank Spot Dollar Rate (Jisdor), the rupiah was at Rp 15,015 per US dollar at the close of trading on Wednesday.
Researcher Teuku Riefky, from the University of Indonesia’s Institute for Economic and Community Research, said the depreciation of the rupiah had the potential to further push up inflation, as a decline in the value of the Indonesian currency would make imported goods more expensive. Meanwhile, most of the country’s manufacturing companies still relied on imported raw materials to maintain productivity.
Bank Permata chief economist Josua Pardede said the rupiah’s depreciation had both positive and negative effects.
Exporters would benefit from the weak rupiah, for example, because their foreign exchange earnings meant that their local currency revenues would be greater. Unlike exporters, importers would suffer because the decline in rupiah meant they would have to pay more to buy foreign products. Moreover, the manufacturing industry was still very dependent on imported materials. (DIM/DIT/BKY)
This article was translated by Hendarsyah Tarmizi.
