EXTREME WEATHER FEARED TO BOOST INFLATION

By Andi Abdussalam

Jakarta, Jan 27 (ANTARA) - The heaviest challenge the government is facing this year is to cover the impact of extreme weather and keep the inflation at a level not too high as a result of food price increases.          This year's extreme weather conditions have the potential of causing a drop in food production and all the negative consequences of such a development.          The House of Representatives (DPR) has reminded the government of the heaviest challenge it is facing in 2011, namely the challenge of keeping inflation under control.          House Speaker Marzuki Alie, in his opening remarks of the House's 2010-2011 Sitting Session recently said that the inflation rate in 2010 had reached 6.96 percent. He quoted data released by the Central Board of Statistics (BPS) early this month. The figure of 6.96 percent inflation based on the BPS data has far exceeded the inflation target set by the government at 5.3 percent for 2010.          "The increase in the prices of basic necessaries such as food and agricultural commodities is quite saddening," the House Speaker said.          After all,  extreme weather conditions can cause an increase in pests and plant diseases. "Then there may be harvest failures and a decline in food production," Husnannindity Nurdin, head of West Nusatenggara's  Food Resilience Agency (BKP) said.          Even, the People's Coalition for Fisheries Justice (Kiara) has asked the government to declare the current  extreme weather conditions a national disaster.          "There are 53 districts and cities in Indonesia which have been impacted by the present  extreme weather conditions and 550,000 people are being  victimized. Looking at the facts, we urge the government to declare present  extreme weather conditions a national disaster," Kiara Secretary General M Riza Damanik has said.          For this purpose, the government has prepared a set of polices to face extreme weather and possible drop of food production in 2011.  It is preparing  two presidential instructions (Inpres) to ensure food security in anticipation of  expected  extreme weather changes.           According to chief economic minister Hatta Rajasa  recently the drafts of the two presidential instructions  were being finalized and would hopefully be issued early in 2011. "We must increase food supply and that is why we need the presidential instructions," he said.          He said one of the instructions would give the agriculture minister flexibility in responding to problems caused by extreme changes in weather pattern, insect attacks or damage to agricultural lands.          Under the presidential instruction, the agriculture minister could issue policies to realize such things as earlier distribution of seeds or provision of contingency funds to anticipate production changes as a result of weather problems through price stabilization or other mechanisms.          Yet, inflation could not be expected to be at the targeted 5.3 percent, but about 6 percent this year, even if the weather conditions will relatively be improving.          Bank Indonesia (BI) Governor Darmin Nasution predicted the rate of inflation this year could be  around six percent if weather conditions improve to a level conducive for food production.          "If the US and European economies  improve and the weather is also improving while capital inflow still happens, the rate of inflation will still be around six percent," he said after dedicating a Bank Indonesia building in West Kalimantan on Wednesday.          He said if the weather conditions in the year to come were not as extreme as now the target of six percent inflation would be reached.          "But we cannot make the assumptions on whether until December the weather would be worse or there will even be a drought," he said.          Even if BI has predicted an inflation of about six percent this year, the government will strive to  keep the inflation rate at  5.3 percent as assumed in the  2011 State Budget.          "We are targeting 5.3 percent and we will coordinate with Bank Indonesia which is responsible for monetary control," Finance Minister Agus Martowardojo said.          The minister said the government would pay attention to inflation as investors' worries over inflation in 2010 that had once weakened the Indonesian Stock Exchange's composite price index to 3,400 points.          "Worries abroad are conditions in Europe, that Portugal and Ireland seem to need a bailout but we heard that European countries also  Japan were all committed to help. So it is the dynamics that we must be alert on," he said.          Right now, he said, the government would not as yet wish to change the macro-economic assumptions and indicators in the 2011 budget including the assumption on inflation.          "We are now concentrating on executions. We have not conducted re-forecasting but we will be alert," he said.          In the meantime, Bank Indonesia (BI) Deputy Governor Hartadi A Sarwono said the central bank would continuously monitor the developments in core inflation  before taking preventive measures in responding to high inflationary pressures.          "Bank Indonesia will not hesitate to raise the BI Rate if there are signs of a rise in core inflation, We do not like the rising inflationary pressures although they were caused by price increases in the food groups because it will affect core inflation," Sarwono said.      (T.A014/H-NG/f001) 27-01-2011 11:59:4