GOVT URGED TO CURB INFLATION

By Andi Abdussalam

Jakarta, Aug 4 (Antara) - The government must intervene to control rising commodity prices that have caused sky-rocketing inflation and weakened the purchasing power of people in middle and lower income brackets, according to officials of local advocacy groups.          "We call  on the government to help overcome increasing basic necessity prices that have boosted inflation to reach eight percent, exceeding the government's target at 7.2  percent," Said Iqbal, secretary general of the Social Security Action Committee (KAJS),  recently said.          The Central Bureau of Statistics (BPS) has reported that Indonesia's inflation rate rose by more than expected in July to 3.29 percent, bringing year-on-year (yoy) inflation to 8.61 percent.          According to the Bank Indonesia (BI/the central bank), the higher-than-expected inflation rate was chiefly caused by disruptions in the supplies of commodities such as onions, red chili, chicken meat and beef, amidst rising demand during the fasting month of Ramadan.          Iqbal urged the government to intervene in overcoming the basic necessity price hikes that caused inflation to rise, exceeding government predictions. He said that the increase in prices of commodities had weakened the purchasing power of the public.           He noted that people are facing post-fasting Idul Fitri festivities when they spent money for celebrating the annual holiday of Lebaran. Besides asking for assistance in curbing price hikes, Iqbal also urged the government to raise laborers' wages so that their livelihoods would be improved.          "We call on the government to raise workers' wage by 50 percent in an effort to release them from the inflation trap and restore their purchasing power, which has been reduced by 30 percent," Iqbal added.          Salamudin Daeng of Indonesia for Global Justice said that as inflation reached 3.29 percent in July 2013, the Indonesian government became trapped by its dependence on imports. In fact, he said, inflation in the field had exceeded that figure.          Indonesia's import policy was implemented by the government because the country's agricultural sector and its production were weak. "Some 70 to 80 percent of raw materials at home are imported. Imports can temporarily meet domestic needs, however, imports could ruin the sources of life, in the long run," he said.          He pointed out that imports could also reduce large amounts of foreign exchange. "Our capital outflow has reached Rp800 trillion. If the government fails to obtain loans, the local rupiah currency will continue to face pressures," he added.          The BPS said Indonesia's inflation rate rose by more than expected in July to 3.29 percent, driven by a rise in food prices and transport fares.          "All 66 cities surveyed for the consumer price index (CPI) recorded inflation," BPS chief Suryamin said Thursday.       The July inflation brought the calendar inflation to 6.75 percent and year-on-year inflation to 8.61 percent, while the core component inflation was 0.99 percent and the year-on-year core inflation in July was 4.44 percent.          He said components of general inflation contributed 3.29 percent and core inflation 0.99 percent, while administered prices contributed 7.9 percent and volatile prices 6.07 percent.          The high inflation rate was caused by an increase in food prices and transport fares, as a result of the government's policy to hike the prices of subsidized fuel oils in June, he said.         "The indirect impact of the fuel price hike is still felt, particularly on transport fares, production cost and food commodity prices," he said.          BI, meanwhile, said the July inflation rate, which accelerated to 3.2 percent or higher than its forecast of 2.7 percent, is at the peak of monthly inflation this year.          Moreover, the impact of subsidized fuel price hikes on transport fares had reached its peak in July, contributing more than half of the realized consumer price index  (CPI) inflation, it said.          As a consequence, administered price inflation rose to 7.90 percent month-to- month (mtm) or 15.10 percent year-on-year, and core inflation remained manageable, although it rose to 0.99 percent mtm or 4.44 percent yoy, fueled by a shortfall in global commodity prices and manageable demand, it said.          Looking ahead, inflation is expected to ease and return to its normal level in upcoming months, with CPI inflation projected to fall to 0.9 percent in August and 0.1 percent in September.          The declining inflation will be fueled by the government's policy to speed up and raise beef imports, as well as to open entry points for imported onions in Java, BI said.          BI Governor Agus Martowardojo also predicted that the inflation rate would return to normal levels after July because the impact of the fuel oil hike on commodity price hikes would have been normalized.     "Inflation is expected to decline this month and become normal in September," the BI governor said.          Agus added that the July inflation rate was beyond BI¿s prediction because of problems in supplies of red onions, chili and beef, and in high seasonal demand and increases in production costs.          He noted that prices of the three commodities had shown a downward trend in the last week of July. Additionally, food imports will begin to arrive early this month.          For this, BI will continue to monitor the impact of the high inflation rate in July. Though it  has not decided whether it will raise its bench mark rate to offset inflation.          "We will still see the impact of inflation, which is still in the level of our prediction. We will discuss it in the BI Board of Governors' meeting to see whether we need to respond with a mixture of polices," Agus said.***3*** (T.A014/INE/S012)