Central, Regional Governments Combine Price Data to Curb Inflation
According to the latest data issued by the Statistics Indonesia (BPS), the annual inflation totaled 4.69 percent in August 2022, a slight decline from 4.94 percent in July.
Various types of rice are offered by traders at the Cipinang Rice Main Market, East Jakarta, on Sunday (30/5/2021).
Ensuring a sufficient food supply is the key in reducing the threat of inflation caused by the rise in fuel prices. The central and local governments will combine their food-price data in order to effectively identify the sources of the inflation.
JAKARTA, KOMPAS — The central and regional governments will combine their data on food commodities that contribute to inflation. A close monitoring of the supply of strategic commodities will be able to effectively ensure availability and affordability of the people’s basic needs.
During a hybrid of the central and regional coordination meetings in Surabaya, East Java, on Wednesday, Coordinating Economic Affairs Minister Airlangga Hartarto said that efforts at controlling increasing inflation would involve the identification of the sources of inflationary pressures using detailed macro and micro data. Interregional cooperation is needed to reduce disparities in food supply and prices between regions, he said.
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According to the latest data issued by the Statistics Indonesia (BPS), the annual inflation totaled 4.69 percent in August 2022, a slight decline from 4.94 percent in July. The decline in the headline inflation was partly due to the drop in the volatile food-price inflation from 11.47 percent in July 2022 to 8.93 percent in August 2022.
He said that as of March 2022, the rice-price increase contributed 23.04 percent to the poverty rate in rural areas and 19.36 percent to the poverty rate in urban areas.
Despite the decline, food prices remain above the consensus of the Central Inflation Control Team, which is 3-5 percent. According to Airlangga, the increase in food prices has contributed greatly to inflation, which could disrupt national economic stability. He said that as of March 2022, the rice-price increase contributed 23.04 percent to the poverty rate in rural areas and 19.36 percent to the poverty rate in urban areas.
Besides rice, other food commodities also contributed to the poverty rate, namely chicken eggs, granulated sugar, chicken meat and instant noodles. As 74.08 percent of the expenditure of poor households is on food, controlling the price of food is needed to prevent the increase in the poverty rate.
In order to maintain the stability of food supply in the short term, local authorities have been encouraged to expand market operations to ensure a sufficient rice supply and the stability of the rice prices.
A rice trader is active in serving buyers at the Rejowinangun Market, Magelang City, Central Java, on Monday (3/12/2018).
Meanwhile, in the medium term, the processing of horticultural products via agribusiness partnerships in a digital-based ecosystem will be expanded. This effort should be supported by the establishment of warehouses of harvested products, both in production centers and consumer areas, to ensure sufficient food stock for the longer term.
Buying power
On the same occasion, Bank Indonesia Governor Perry Warjiyo said that the increase in the prices of goods regulated by the government (administered prices), especially subsidized fuel and transportation fares, had also contributed to the increase in inflation. If the food-price inflation cannot be suppressed below 5 percent, people's buying power will be eroded, and it can have an impact on people’s welfare.
For this, the government has decided to distribute cash transfer to poor families, wage-subsidy assistance and the allocation of 2 percent of regional general-transfer funds for social protection.
In order to prevent the increase in the administered prices from pushing up the core inflation, which is currently around 3 percent, the people's buying power has to be maintained. For this, the government has decided to distribute cash transfer to poor families, wage-subsidy assistance and the allocation of 2 percent of regional general-transfer funds for social protection.
Bank Mandiri’s economist, Faisal Rachman, said that inflation caused by rising fuel prices can be controlled if the government can ensure a sufficient food supply. Controlling food inflation is not only important to suppress inflation in general, but also to maintain the level of the people's welfare.
Technically, an increase in fuel prices will trigger an increase in the prices of goods and services related to fuel. If the government is able to maintain a sufficient food supply and ensure smooth distribution, the impact of increasing fuel prices on food prices can be minimized.
To minimize the impact of the rise in the fuel prices on those in a low income-bracket, East Java provincial government would prioritize the distribution of social assistance to motorcycle-taxi drivers; micro, small and medium entrepreneurs; and fishermen, the Deputy Governor of East Java Emil Elestianto Dardak said.
President Joko Widodo talks with farmers in Wanasari Village, Indramayu Regency, West Java, on Wednesday (21/4/2021).
President Joko “Jokowi” Widodo has asked the regional governments to use 2 percent of the regional-transfer allocation to finance social assistance. However, as the remaining amount of the regional transfer allocated for East Java in 2022 totals about Rp 3 trillion at present, the provincial government would instead take the funds of Rp 60.2 billion (equal to 2 percent of the regional-transfer funds) from the standby funds which now amount to a total of Rp 192 billion.
Efforts to create job opportunities are carried out in part through labor-intensive projects, such as the cleaning of coastal areas by fishermen. (DIM/HEN/DIT/NIK/DIA/ETA)
(This article was translated by Hendarsyah Tarmizi)