Putting Serious Attention to Foods Inflation

Jumat, 05 April 2013 | 09:14

The House of Representatives finally approved Agus D.W. Martowardojo to substitute Darmin Nasution as Bank Indonesia Governor for 2013 – 2018 periods.The approval was given in Parliament plenary session after getting a recommendation from the Commission XI which was assigned to conduct due diligence and to propose a candidate for Governor of BI.

 On that occasion, the Commission XI gave some notes to Agus Martowardojo in performing his duties as BI Governor in the future. Those notes include maintaining regional inflation control team (TPID), maintaining a stable exchange rate, and applying reciprocity principle between national banks and foreign banks.


Inflation control issue becomes a special note given that in the first quarter of 2013, regional inflation rate has reached half of inflation target set in the 2013 state budget of 4.9%. According to Statistics Indonesia, inflation rate in January – March reached 2.43%.

March 2013 inflation rate was at 0.63%, the highest rate in March for the last 5 years. This situation is interesting given that usually March inflation rate tends to be low since it coincides with rice harvest. Moreover, a few years ago, Indonesia posted deflation during March. The high inflation rate during March 2013 was due to the surge in food ingredients, reaching 0.51%. Soaring inflation rate over the past month definitely threatens the inflation target of 4.9% in 2013 state budget.

If it continues to rise, the government should be able to keep it at 5.5% at maximum, otherwise, BI rate cannot be maintained at 5.75%. There will be a long-term impact if BI rate is increased.

We were not surprised by the high rate of inflation during March 2013, as food crisis also occurred in that month, particularly shallot and garlic. It shows that the government’s efforts in monitoring the price of onions and other agricultural commodities, for example chili, haven’t provided satisfactory results. The food imports policy taken by the Trade Ministry and Agriculture Ministry hasn’t been optimal.

It takes time to make the food imports policy effective. The prices of the commodities are predicted to decline in April so that the inflation could also fall.  

Can it happen? We are optimistic that the inflation rate will be relatively restrained for the rest of the year even though it might rise again approaching the Eid al-Fitr (Lebaran). However, it requires the government to take the right decision in controlling food prices, which is the primary component in the inflation.

The problem is that the food price control policy often becomes a dilemma, whether it’s suffice the food supply-meaning it needs to allow imports to make the supply available in the market-or protect the interests of local food producers to improve the farmers’ welfare?

The clear example is the shallot. Do we want to protect the local shallot farmers by limiting imports, while on the other hand the market supply is very limited?

These matters must be responded and executed thoroughly and firmly by the officials from the Trade Ministry and Agriculture Ministry to prevent such food shortages from recurring.

The food shortages clearly become the direct driver of inflation, while on the other hand the food supply can actually be anticipated. Did the government’s officials anticipate it?

Therefore, we hope for clearer policy coordination between the two ministries as well as good coordination with Bank Indonesia, which will enable them to control food prices and keep the inflation rate at a manageable level. (t07/t06/aph)

sumber http://en.bisnis.com