Jakarta (The Jakarta Post/ANN) - Bank Indonesia (BI) says it will prepare 89.4 trillion rupiah (US$9.5 billion) of hard cash to anticipate Indonesian demand for money and the traditionally higher number of transactions during Ramadan, the Muslim fasting month.
"We have estimated the amount based on past experience. The amount, however, will depend on the length of the holidays. If [the government] decides to set more days as holidays, then we may increase the supply," BI Governor Darmin Nasution told reporters yesterday.
Based on BI's data, the last operating day before the end of last year's Ramadan, marked by the Idul Fitri holiday, saw 77 trillion rupiah ($8.1 billion) of cash outflow, 25 per cent more than BI's estimate and 40 per cent up on 2010 figures.
Following lengthy debate, the government set Ramadan to begin on Saturday, after which the country's Muslims are obliged to abstain from food, drink and sensual pleasure from the break of dawn until sunset.
Every year, Indonesia, the country with the biggest Muslim population in the world, sees higher rates of inflation and consumption during Ramadan as citizens prepare more food to break their fast and buy clothes for Idul Fitri festivities at the end of the fasting month.
"Inflation is usually higher during the four-week fasting month. However, we are unlikely to see [price increases] in the first week, prices usually start to rise during the second and third week," Nasution explained.
The central bank governor added that he expected the inflation rate to stay at a manageable level, citing the fact that the country would see 0.7 per cent monthly inflation this month. With six months to go before the new year, Indonesia's year-to-date inflation, ending 30 June stood at 1.79 per cent.
Nasution was confident that the central bank would be able to meet the target, saying that he remained optimistic that monthly inflation during Ramadan would stay at below 1 per cent. The central bank has kept its interest rate unchanged at record low of 5.75 per cent for six months.