This Is Sri Mulyani's Strategy To Raise Inflation To The 3 Percent Level In 2022

JAKARTA - The government through the Ministry of Finance (Kemenkeu) said that the inflation target of 3 percent is expected to occur throughout 2022.

Minister of Finance (Menkeu) Sri Mulyani said this figure was the most appropriate level in accordance with the government's plan for medium-term development.

“Inflation is expected to strengthen in 2022 in line with improving demand. Therefore, we project that inflation next year will be 3 percent plus or minus 1 percent,” he said during a Working Meeting (Raker) with Commission XI of the DPR which was broadcast virtually, Monday, August 30.

According to the Minister of Finance, the medium-term inflation target is in line with the structural reform agenda.

“The government will continue to look at market conditions which are expected to be more efficient. In addition, the inflation factor can also be caused by incentives given to the business world," he said.

The Minister of Finance added that the increase in inflation next year is believed to have an effect on increasing production capacity and improving food governance.

“For the next years, we will continue to watch this development carefully. The government will look at various reforms in terms of communication, distribution, supply (goods and services), as well as patterns of seasonal consumption (Eid, Christmas, New Year)," he explained.

In addition to inflation of 3 percent, in the Draft Law on the 2022 State Budget, the government proposes several macroeconomic assumptions to the DPR, namely economic growth of 5-5.5 percent, the exchange rate of the rupiah against the US dollar of Rp. 14,350, and the interest rate on government bonds. (SUN) 10 years by 6.82 percent.

To note, inflation itself is one of the macroeconomic indicators that is quite important because it can be a benchmark of a country's economic activity in one period.

Inflation has a positive impact and a negative impact depending on the severity of inflation. If the inflation is mild, it will have a positive effect in the sense that it can encourage a better economy, namely increasing income and investing.

On the other hand, in times of severe inflation or when inflation is out of control (hyperinflation), the economy becomes chaotic and the economy feels sluggish. People become discouraged from working, saving, or investing and producing because prices are rising rapidly.

The government itself in the Minister of Finance Regulation (PMK) Number 124/PMK.010/2017 concerning the inflation target sets the amount of 3-4 percent of the inflation rate with a deviation (plus-minus) of 1 percent. Meanwhile, this year's inflation is believed to be at the level of 1.6 percent.