"At Ramadan, Indonesia offers sermons on inflation to keep a lid on prices"

In the heart of Southeast Asia, Indonesia is experimenting with an unconventional approach to managing inflation: using religious sermons during Ramadan to encourage price stability. This strategy, while novel, raises intriguing questions about the intersection of faith and economics, and its potential to influence consumer behavior and inflationary trends.



Historical Context and Current Trends

Indonesia's recent economic history is marked by significant fluctuations in inflation. The country experienced its highest inflation rate of 82.40% in September 1998, during the Asian financial crisis. Since then, inflation has generally trended downward, with the most recent deflationary period occurring in February 2025, when consumer prices fell by 0.09% year-over-year. This deflation was largely driven by a 12.08% slump in housing prices, a result of 50% electricity discount tariffs implemented in the first two months of 2025.

The Role of Religious Sermons

During Ramadan, a time of heightened religious observance and community awareness, Indonesia's religious leaders are using sermons to encourage frugality and ethical pricing practices. This approach is rooted in the belief that religious teachings can influence consumer behavior and promote economic stability. By emphasizing the virtues of saving and living within one's means, sermons aim to reduce demand and control inflation.

However, the effectiveness of this approach is debatable. While religious sermons can foster a sense of community and shared responsibility, their impact on inflation is likely to be limited and unpredictable. Traditional economic policies, such as raising interest rates or implementing fiscal austerity measures, provide a more direct and measurable approach to controlling inflation. For example, the 50% electricity discount tariffs in Indonesia led to a significant slump in housing prices, demonstrating the direct impact of traditional policies on inflation.

Economic and Social Impacts

The use of religious sermons as a tool to manage inflation has both economic and social implications. Economically, sermons could encourage frugality and reduce demand, thereby controlling inflation. However, their effectiveness is uncertain, and economic stability might be compromised if sermons fail to influence consumer behavior significantly. In contrast, traditional policies provide a more predictable and measurable impact on inflation.

Socially, sermons could foster a sense of community and shared responsibility, potentially strengthening social cohesion. However, traditional policies might exacerbate social divisions, as different segments of society are affected differently. For example, the 12.08% slump in housing prices due to electricity discount tariffs could disproportionately affect certain groups, leading to social inequality.

Policy Prescriptions

Given the mixed inflation trends in Indonesia, a balanced approach that combines traditional economic policies with religious sermons could be effective. Traditional policies, such as raising interest rates or implementing fiscal austerity measures, can provide a direct and measurable impact on inflation. Meanwhile, religious sermons can reinforce the importance of price stability and ethical pricing practices, especially during a period of heightened religious observance and community awareness.

In conclusion, while religious sermons during Ramadan can play a role in promoting price stability and ethical pricing practices, their effectiveness in managing inflation is likely to be limited. Traditional economic policies provide a more direct and measurable approach to controlling inflation, although they may face resistance and lead to social unrest. The choice between these approaches would depend on the specific economic and social context, as well as the goals and priorities of the policymakers. The world must choose: cooperation or collapse.