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Rupiah plummets, prices rocket

Voice of America - August 29, 1997

Jakarta – Indonesia's currency has plummeted to three-thousand Rupiah to the dollar, during the past few weeks. the sharp decline in the Rupiah and a prolonged drought have sent the price of basic food stuffs in the Southeast-Asian nation soaring. Jenny Grant reports from jakarta ordinary indonesians are feeling the aftershocks.

At the Pasar Minggu market in South Jakarta thousands of women jostle to buy their daily goods. This traditional market is the cheapest place to buy fresh food in Jakarta. but during the past four-weeks prices have increased between 15 and 60-percent on basic goods such as pepper, vegetable oil, tea, chilli, and onions.

Hafni, the 25-year-old owner of the Abadi shop in Pasar Minggu says the prices of more than one-half of his commodities have risen since early August.

Mr. Hafni says rice has risen 20-percent a kilo – about 40- cents. He says vegetable oil has increased by 11-percent and pepper is up 66-percent a kilo – about seven dollars.

He has owned the small wooden shop for four years and says his customers are now buying less and choosing cheaper spices.

Ibu Mar walks barefoot around the market with a tray of colorful cakes. The mother of two has been selling fried bananas and sticky rice at the market for seven years.

She says the price of her ingredients – wheat flour, cooking oil, and sago palm – have risen by around 15-percent, but her selling price must remain at 100-Rupiah per cake – about four cents. Ibu Mar says people will simply not buy the cakes if she hikes the price, which has been the same for the past three years. She says she and other cake sellers must absorb the higher costs for no return.

In front of the traditional market, dealers in a row of electronic shops say they are also feeling the effects of inflation.

Rijen, who works as an assistant in an electronics store selling fans, hairdryers, and rice cookers, says most electrical goods have gone up by 10-percent. He says the store has temporarily stopped any new factory purchases because the owners are afraid of having imported goods from Taiwan, South Korea, and China that customers cannot afford to buy.

Economists say the currency crunch has coincided with a severe drought that damaged crops such as rice, coffee, and corn.

Bruce Rolph from Bahana Securities told V-O-A the government has made an effort to control the price of basic commodities such as rice and cooking kerosene – which is seen as important for maintaining security in the nation of 200-million people.

This week, President Suharto warned indonesians the drought could cause food shortages until december. He ordered food related ministries to take extra care in ensuring adequate supplies of basic commodities.

The price of building material has also risen, making new homes more expensive. Mr Rolph said the full impact of the currency crisis has not yet been felt.

There are some companies, because of shortages in working capital, which are scurrying around with some alarm trying to get enough money to pay wages. That will start to have some effect over the next couple of weeks and of course food prices at the markets have already begun to rise. Building material costs in the last month have risen 35 to 40-percent, so I would say in the next four weeks it will start to become very obvious to the ordinary indonesian.

Mr. Rolph said severe inflationary pressure during the next few months could push Indonesia's 1997 inflation rate to eight or nine-percent. Inflation last year was six and one-half-percent.