This prediction will particularly be true if the domestic oil price is raised by Rp1,000 per liter,Jakarta (ANTARA News) - If the present oil price volatility continues, it could contribute one to two percent to Indonesia`s inflation, an observer said.
"This prediction will particularly be true if the domestic oil price is raised by Rp1,000 per liter," M Ikhsan Modjo of the Brawijaya University said here on Tuesday.
He said that this would constitute the first round contribution to the inflation as there would also be a second round one which would boost the inflation further.
However, if the price is raised by Rp500 per liter, it will only contribute between 0.7 and 0.8 percent to the inflation rate, he said.
Modjo said that if the domestic oil price was raised by Rp500 per liter only the government would be able to save Rp7 trillion to Rp8 trillion, while if the government raised it by Rp1,000 per liter, the government would be able to save Rp14 trillion and Rp15 trillion.
He said that of the three options offered by the Subsidized Fuel Oil Consumption Limitation Supervisory Team, the option of raising the price was the most rational.
"There would be no problem with inflation as long as the economic growth remains high," the observer said.
After all, he added, raising the oil price has a strong legal basis, namely the law on the 2011 state budget.
The law provides a chance for the government to increase the oil price at home if the world crude price reached 10 percent of the assumption price set at the state budget, he said.
"I think the increase in the world crude price has reached over the 10 percent level of the assumption price in the 2011 state budget, which was set at US$80 per barrel," M Ikhsan Modjo said.(*)
Editor: Heru Purwanto
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