Domestic economy is facing inflation – cont’d

- Bank Indonesia is being careful on its monetary policies due to high inflationary pressure. The decision of not following the Fed has increased spreads and strengthened the rupiah.

- The government is revising budget to cope with inflation and budget deficit.

- During a meeting with us, Ministry of Finance has been very firm that Indonesia will not raise fuel price as it did in November 2005. Reducing fuel subsidy will be conducted in other ways such as limiting availability of subsidized fuel (premium) in big cities. It will allocate direct subsidy for the poor to cope with rising food prices. Wage increase will still be done.
The above will help support purchasing power.

- The government is cutting import tariffs of wheat and soybean to reduce prices.

- Cost saving will be conducted to 15% across-the-board expense cut in all departments.