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NEWS UPDATES 14 August 2010

Indonesia steps up price controls

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The annual price inflation that follows Ramadan and a prolonged rainy season has forced the government to step up price controls for staples.

The Trade Ministry said Friday that the distribution of subsidized rice for August would be doubled in terms of volume in comparison to previous months, as it would include stock allocated for September.

The State Logistics Agency (Bulog) will complete full distribution of the rice by the end of the third week of August, said a ministry official. Rice price fluctuations are the greatest contributor to staple food price inflation on a monthly basis.

The Central Statistics Agency (BPS) said inflation reached 1.57 percent in July, while for the period of January to July, inflation was 4.02 percent, to which food staples contributed 1.08 percent. The Bank Indonesia governors meeting on Aug. 4 maintained the central bank’s benchmark rate at 6.5 percent, citing manageable inflation.

Since the start of the month, Bulog has been distributing non-subsidized rice on the market to intervene with prices. The measure has been criticized as ineffective, as the agency has offered the same price as retailers on average.

Subagyo, director general of domestic trade at the ministry, said the price of rice would not be allowed to increase more than 3 percent during the fasting month, which lasts until Sept. 10. “If the price increases by 3 percent or more, it will significantly influence the inflation rate,” he said at the ministry in Jakarta.

According to data issued by the ministry on Friday, the average price of medium-quality rice increased by 0.34 percent to Rp 6,717 (75 US cents) per kilogram earlier in the morning from Rp 6,694 the previous day. The highest price was recorded in Gorontalo at Rp 7,500 and the lowest recorded in Makassar, South Sulawesi, with Rp 5,500.

The report also shows that the monthly average price of medium-quality rice increased by 1.94 percent to Rp 6,626 per kilogram in August, as measured in the first 13 days of the month, from Rp 6,500 during the entire month of July.

Research firm Nielsen estimated that grocery prices would rise 15 percent on average during the fasting month and expected consumer goods sales to grow 12 percent compared to the same period last year.

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