President Joko Widodo has asked local governments to not only prioritise economic growth but also control inflation. High economic growth combined with high inflation is detrimental to local communities.
"Economic growth is important, but inflation is also very important. I am very pleased that every year there is an awareness that inflation must be kept under control," the president said when opening the National Coordination Meeting for Regional Inflation Control Teams (TPID) in Jakarta, Thursday (4/8).
The President said the four cities with the highest inflation rates are Tanjung Pandan, Bengkulu, Merauke, and Pangkal Pinang. The four cities with the lowest inflation are Ambon, Bulukumba, Cirebon, and Meulaboh.
Widodo compared Indonesia's inflation rate to those of other countries. For example, inflation in the United States is 0.12 percent, and it is 0.04 percent in Europe. Neighbouring countries Malaysia and Singapore recorded 2.1 percent and minus 0.54 percent, respectively.
According to the President, one way to guard against inflation increases is to set up local inflation control teams. That means 27 of the 516 regencies/ cities that do not have local inflation control teams are expected to do so immediately. (Read: La-Nina Triggers Inflation, BI Prepares 6 Preventive Steps)
Widodo also asked that the budget for price control be increased. The budget can be used to intervene when prices fluctuate. Widodo appreciated the efforts by East Java provincial government to control transportation costs, and the Jakarta governor's moves to control beef prices.
The budget to control transportation costs can be used for repairing roads. Badly maintained roads lead to increased distribution costs, which jacks up the price of the goods.
Another way to control inflation is by conducting unannounced inspections of food commodity storehouses, in collaboration with law enforcement agencies, to check if commodity stocks are low or are excessive. (Baca: High Prices of Food, Transportation Brings July Inflation to 0.69%)
"When stocks are low, we need to take action to top them up. But if the stock pile ups, something is wrong, and we’ll order them to bring out their stocks immediately," Widodo said. This will restabilise food prices at the district/city level.
These initiatives are expected to keep inflation under control to meet this year's and next year's target of 4 percent, plus or minus one percent. For 2018, the inflation target is even lower, at 3.5 percent, plus or minus one percent.
Widodo believes that curbing inflation will allow the economy to grow five percent without detriment to people's purchasing power. "High economic growth is not something to be proud of if we can't control inflation." (Read: Budget Absorption Low, Widodo Reminds Regional Governments)
On the other hand, Widodo is urging local governments to speed up budget disbursement to support economic growth.
But he lamented the high level of unused regional budget currently deposited in banks, which amounted to IDR214 trillion as of the end of June.
However, that is down on last month’s figure of IDR246 trillion.
This budget is a source of money in circulation, which should be driving domestic consumption. Widodo has threatened to change the disbursement scheme of regional budgets from direct transfer to bonds if things do not change. "We must stop delaying budget spending. The money must be withdrawn (from banks) immediately," he said.