Horror! Jokowi's Ban On CPO Exports Could Boomerang For Indonesia, Here's The Story

Illustration (Photo: Doc. Ministry of Finance)

JAKARTA – An economic observer from the Center of Reform on Economics (CORE) study institute Yusuf Rendy revealed that the opportunity for increasing global inflation is wide open in line with President Joko Widodo (Jokowi)'s decision to ban the export of crude palm oil (CPO).

According to him, Indonesia as the world's largest producer and exporter of CPO will have a significant impact on the world economy. The reason is, CPO is one of the important raw materials used by various industries.

Thus, this scarcity is believed to be able to increase the selling price of CPO on the international market due to limited supply from Indonesia.

"Yes, with the ban on CPO exports, it means that the sentiment of getting CPO as a raw material for various food products is also getting bigger. If it gets more difficult, of course it will raise prices higher and also cause inflation to increase," he told VOI on Tuesday, April 26.

Rendy added that price fluctuations were actually very strong even before the plan to ban Indonesia's CPO exports.

"In fact, we know that even before this policy, the price of CPO had already gone up due to the sentiments of the geopolitical conflict between Russia and Ukraine," he said.

Rendy himself is worried that excessive global inflationary pressure will make a number of developed countries accelerate monetary policy adjustments, which could affect various other countries, including Indonesia.

"If inflation increases, developed countries will take monetary tightening steps, one of which is by raising the benchmark interest rate, a policy in general has the potential to be followed by developing countries including Indonesia," he said.

"If raising the benchmark interest rate is done at the wrong time, it will certainly affect the process of economic recovery in Indonesia," he stressed.

It is not only the interest rate that will be affected, the stability of the price of goods in the country as well as the country is believed to be increasing as a result of global conditions.

"On the other hand, global inflation at its estuary can also raise domestic inflation due to rising prices for imported products," said Rendy.

As previously reported by VOI, the government decided to ban the export of CPO to provide greater space for national cooking oil needs as well as efforts to stabilize prices in the country.