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Indonesia vows to keep food prices stable during Ramadan

Jakarta Post - March 13, 2024

Ruth Dea Juwita, Jakarta – Indonesians have entered Ramadan with soaring food prices amid increased demand, and economists are predicting further hikes over the next two months, but the government has sought to assure the public that it will keep staples affordable.

As of Friday, four days before Ramadan, the price of mid-quality rice had risen nearly 10 percent year to date (ytd) to Rp 16,000 (US$1.02) per kilogram, according to data from the Bank Indonesia (BI) National Strategic Food Price Information Center, just days before the start of Ramadan.

It has remained in excess of the government's ceiling range of Rp 10,900 to Rp 11,800 per kg since last year, when the El Nino climactic phenomenon brought drought and harvest delays to parts of the country.

The price of chili peppers has risen the most this year of the key staple foods monitored by BI, up 12 percent ytd as of Friday. It was followed by eggs, up 11 percent ytd; bulk cooking oil, up 10 percent; and poultry, up 6 percent.

I Gusti Ketut Astawa, undersecretary for food availability and stabilization at the National Food Agency (Bapanas) told The Jakarta Post on Thursday that the supplies of essential foods such as rice, chicken, beef, onions, shallots and chili peppers were "more than enough" to meet demand.

"We have sufficient food stocks for Ramadan, Idul Fitri and the following months," Ketut said.

The agency expected the price of rice to fall to a "fair" level during the harvest season, which would peak in April, he said, adding that eggs should experience a similar price moderation.

The agency, Ketut said, was working with the central government and local administrations to mitigate price hikes in the coming weeks, including through low-cost food programs and improved food distribution and crop cultivation.

"We asked farmers to plant chili earlier to push the price [down]," Ketut said.

Rice prices typically account for the largest share of food inflation in Indonesia, a tendency made more pronounced by El Nino.

Statistics Indonesia (BPS) has predicted a possible 17.54 percent yoy decline in rice production for the January-April period.

Ketut said the national average price of unhusked, undried rice (GKP) was hovering around Rp 7,200 per kg, exceeding the government's purchase price (HPP) of Rp 5,000 per kg, a benchmark to tell whether the State Logistics Agency (Bulog) could absorb the stock or not.

He said that given the current trend, it would be difficult to bring the price of rice back within the government's ceiling, as the price of husked rice was typically double that of unhusked, partially dried rice.

Center of Reform on Economics (CORE) agriculture researcher Eliza Mardian attributed the high food prices to recurring seasonal patterns combined with inadequate post-harvest technology.

"There's a lack of data to track the distribution and stock of rice at the milling, corporate, retail and community levels," Eliza said, pointing to data discrepancies that had remained unexplained for years.

In the long term, she hoped the government would improve the country's food production processes.

"Indonesia should invest in post-harvest technology and start storing excess products in cold storage to better maintain stocks and prices," she said.

Bank Permata chief economist Josua Pardede told the Post on Friday that rising food demand would outpace efforts to bolster the supply, which could cause further inflation.

"This could push annual inflation in March and April to around 3 percent, but it will still be within central bank's target range of 1.5 to 3.5 percent," he said.

Indonesia has seen a surge in volatile food prices, with February data from BPS showing an 8.47 percent year-on-year (yoy) increase, the highest since September 2022.

Inflation more broadly was kept at 2.75 percent yoy in February, BPS data shows.

Bank Indonesia (BI) predicted in a March 1 release that inflation would remain under control in the coming months. It said volatile food prices would eventually stabilize as the country took steps to strengthen its supply and distribution.

BI said in February that it intended to keep the annual increase in volatile food prices below 5 percent this year.

Coordinating Economic Minister Airlangga Hartarto told reporters on Friday that the government would secure more rice supplies from overseas, including by lobbying neighboring countries such as Cambodia. It was also seeking to disburse cash aid before Idul Fitri, he added.

Ketut of Bapanas noted that the agency had proposed a standby food budget allocation to the Finance Ministry so that it could better stabilize food prices and supply.

The budget would allow Bulog and state-owned food holding company ID FOOD to take out loans from national banks at much lower interest rates. The loans would be used to secure food supplies from local farmers and through imports.

Source: https://asianews.network/indonesia-vows-to-keep-food-prices-stable-during-ramadan