Monetary and Fiscal Policy Coordination
With inflation in Indonesia is not only influenced by demand pull, but also cost push factors, it is vitally important for the Government and Bank Indonesia to coordinate their actions through integrated macroeconomic policies if inflation targeting is to be effective. At the policy making level, Bank Indonesia and the Government address this need by holding regular Coordination Meetings to discuss the latest economic developments. Similarly, Bank Indonesia is also frequently invited to Cabinet Meetings chaired by the President of Indonesia to provide opinions on macroeconomic and monetary developments relevant to achievement of the inflation target. Coordination of fiscal and monetary policy also takes place in the joint formulation of the State Budget Macro Assumptions deliberated with the Indonesian Parliament. In other areas, the Government coordinates debt management operations with Bank Indonesia.
At the technical level, the coordination between the Government and BI has been established with the formation of the ministerial level Inflation Targeting, Monitoring and Control Team (TPI) in 2005. The TPI members include Bank Indonesia and technical ministries, such as the Ministry of Finance, Coordinating Ministry for the Economy, National Development Planning Agency, Ministry of Trade, Ministry of Agriculture, Ministry of Transportation and Ministry of Manpower and Transmigration. In view of the importance of this coordination, TPI was expanded to the regional level in 2008. Looking forward, the Government and BI envisage even stronger coordination with the support of ministerial and regional level TPI forums to bring about low, stable inflation as a platform for sustainable economic growth.