Indonesia's president has signed a decree allowing the government to cap prices of staple foods, cement and other basic goods during peak demand periods, a presidential spokesman said as the Muslim fasting month of Ramadan began on Thursday.
President Joko Widodo, who has also limited the rise in domestic petrol prices, is looking at ways to stimulate the flagging economy which is at its weakest since 2009.
"This regulation gives the authority to the government to set special prices ahead of, on, or after religious holidays or during periods of price volatility," Teten Masduki, presidential spokesman, told reporters.
Volatile food prices drove Indonesia's annual inflation rate to a five-month high of 7.15 percent in May, far higher than in other Southeast Asian economies.
The government is imposing extra measures to ensure prices for food and basic goods do not spike during Ramadan, usually Indonesia's biggest shopping season.
Earlier on Thursday, Indonesia's central bank kept its benchmark reference rate unchanged at 7.50 percent, saying the level is still consistent with efforts to contain inflation and make the current account deficit healthier.
"The goal is good - to ensure price stability - but to industry players this is an interventionist policy," said Eric Sugandi, an economist at Standard Chartered.
"People, especially the poor, may be happy with that but we have to look at the effectiveness," he added. "The losers will be the traders and industry players."
Cement and food firms that may be affected by any cap in prices include PT Semen Indonesia Tbk, PT Indocement Tunggal Prakasa Tbk, PT Indofood Sukses Makmur Tbk and PT Tiga Pilar Sejahtera Tbk and Cargill .
Widodo, who was inaugurated in October, has promised to make Indonesia self-sufficient in various foods and has committed to building more dams, modernising irrigation systems, increasing planting areas for foods and providing easier access to credit for smallholder farmers.
Domestic food prices of chilies, shallots and rice have fluctuated this year, with the government citing dry weather, food hoarding and speculators.
Widodo could be forced to backtrack on his promises to curb rice imports, however, with analysts saying the country may ship in as much as 1.6 million tonnes this year due to soaring prices at home and the threat of a strong El Nino.
Southeast Asia's biggest economy already sets price floors for farmers of staple foods and limits the export and import of some foods, including rice and sugar.
No comments:
Post a Comment