As always the case, prices are hiking up as the fasting month is coming. In the month of Ramadhan, muslims restrain from eating and drinking from dawn till dusk. One would expect a drop in demand for food and beverages.
But this is never the case. Instead, prices soar in response to a jump in demand. Because actually most people want better or even more extravagant meal to break the fast. Furthermore, events like "buka bersama" (breaking the fast together - usually with rich variety of food, in restaurants or otherwise) are pervasive. Some people have twice in one evening. Nearing the end of the fasting month, not only food's prices are high, but those of clothes also rise. Because people want new, fancier dress in the Lebaran Day. Then there is "mudik" (homecoming, special in Ramadhan for its massive flow of people - and money), where migrant workers go visit their hometown, bringing presents and usually, some good dose of cash. Some even buy new motorbikes, ship them with train, and have happy time in their villages.
Now, with these information, how do we not expect higher inflation?
But people and the media always blame the government for not being able to halt the soaring prices in this particular time. As a result, the government officials always appear in defensive mode. Some come up with funny arguments ("stop eating chilies", "we will punish sellers who raise prices too much", etc).
In fact, hiking prices are good in the above situation. They need to go up to respond to the large increase in quantities demanded. Otherwise, the filter effect of price is dead: we will see even more extravagant fiestas in the holy month - not that it's a bad thing.
So if any, the government should do something on the supply side, not on the demand side. And that's not by punishing the sellers who now see opportunity to reap extra profits. No. But by improving the logistics and infrastructure condition of the country. That is, keep working on tackling the most constraining factors in our economy. Yes, that's more like longer term program to address the economy as a whole, rather than a short term solution to the Ramadhan-led inflation. But why should it be the latter?
But this is never the case. Instead, prices soar in response to a jump in demand. Because actually most people want better or even more extravagant meal to break the fast. Furthermore, events like "buka bersama" (breaking the fast together - usually with rich variety of food, in restaurants or otherwise) are pervasive. Some people have twice in one evening. Nearing the end of the fasting month, not only food's prices are high, but those of clothes also rise. Because people want new, fancier dress in the Lebaran Day. Then there is "mudik" (homecoming, special in Ramadhan for its massive flow of people - and money), where migrant workers go visit their hometown, bringing presents and usually, some good dose of cash. Some even buy new motorbikes, ship them with train, and have happy time in their villages.
Now, with these information, how do we not expect higher inflation?
But people and the media always blame the government for not being able to halt the soaring prices in this particular time. As a result, the government officials always appear in defensive mode. Some come up with funny arguments ("stop eating chilies", "we will punish sellers who raise prices too much", etc).
In fact, hiking prices are good in the above situation. They need to go up to respond to the large increase in quantities demanded. Otherwise, the filter effect of price is dead: we will see even more extravagant fiestas in the holy month - not that it's a bad thing.
So if any, the government should do something on the supply side, not on the demand side. And that's not by punishing the sellers who now see opportunity to reap extra profits. No. But by improving the logistics and infrastructure condition of the country. That is, keep working on tackling the most constraining factors in our economy. Yes, that's more like longer term program to address the economy as a whole, rather than a short term solution to the Ramadhan-led inflation. But why should it be the latter?
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