INFLATION IN TIMOR-LESTE ON A STEEP RISE: INFLATION IS THE FEEDER OF POVERTY

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FRETILIN.MEDIA BRIEFING NOTE: Dili, 29.3.2011

INFLATION IN TIMOR-LESTE ON A STEEP RISE: INFLATION IS THE FEEDER OF POVERTY

The inflation figures recently released by the government indicate thefollowing:

• The monthly increase in the CPI was of 1.1% in January 2011 to 3.7% in February, a significant increase that results in an increase in the average annual CPI from 7.2% in January to 7.7% in February 2011.

• Looking at the inflation for food, weighed by the "basket of commodities" which serves as the basis for calculating the CPI, it shows that it was 56.7% in February 2010, but rose by 13.1% between then and February 2011. This is a rise attributed to, amongst other things on an 8.8% in the rise in the prices of grains (almost entirely made up of rice), 17% rise in the price of meat and derivatives thereof, and 26% in the rise in the price of vegetables and other groceries.

• Transport (including the cost of fuel) is around 12% more expensive now than a year ago. This is largely attributed to the rise in the price of fuel (the price of petrol for example rose from US$1.03 toUS$1.16 just in February-Mach).

There will be those who will say that this inflationary trend in basics is due to the fact that Timor-Leste imports most of what it consumes. However, many of the products that have registered rises inprice are produced domestically. This must mean that there is a huge gap between demand and supply, which suppliers take advantage of to increase prices. This “gap” have a lot to do with the huge increase in public spending, as well as a fall in domestic production.

Finally, and just by way of comparison, Indonesia, the primary source of imports into Timor-Leste, has seen a monthly fluctuation of only 0.89% for January, and 0.13% for February 2011. This is significantly lower than the 1.1 and 3.7% seen in Timor-Leste.

Conversely, salaries of those in employment including the civil service, with the exception of a 400% rise for politicians in 2009,have remained stagnant.

The purchasing power of ordinary citizens has been drastically eroded. (Based on data obtained from (but rewritten by FRETILIN.Media) fromsite in Portuguese:É a economia, estúpido!...

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