Global crude price hike may trigger inflation: Chief economic minister

"If prices increase, the inflation rate will go up accordingly," Darmin Nasution said.
Jakarta (ANTARA News) - Global crude price hike may lead to the adjustment of domestic fuel price and raise the inflation rate indirectly, Coordinating Minister for Economic Affairs Darmin Nasution has stated.

"If prices increase, the inflation rate will go up accordingly," he said at a working meeting with the Budget Board of the House of Representatives (DPR) here on Wednesday.

The global crude price hike will add to the governments burden to increase budget allocations for fuel subsidy unless the fuel oil price is raised, he said.

He said the government still allocates fund for energy subsidy in the state budget, particularly for diesel oil, liquefied petroleum gas in 3-kg cylinders and vegetable fuel.

"We may raise subsidy by up to Rp60 trillion rather than raising fuel prices," he said.

After all, the government has its own calculation to address the global issue and continues to try to keep the inflation rate under control, he said.

Darmin, who is also former governor of Bank Indonesia (BI/central bank) said the government is still undecided whether it will issue a policy to respond to the movement of global crude prices, particularly ahead of the post-fasting month Lebaran festivities.

The government said earlier it has made efforts to control the inflation rate from volatile foods since early this year by strengthening supplies to curb prices.

The Central Statistics Agency (BPS) announced recently the calendar inflation rate from January to May 2017 stood at 1.67 percent and the year-on-year inflation rate at 4.33 percent.

However, the inflation rate in the past three months was very much influenced by the administered prices, particularly electricity tariff for 900-VA household customers.

Hence, the government will control the movement of fuel oil prices and electricity tariffs so that the inflation rate at the end of this year will meet the target of 4, plus or minus 1 percent.(*)