(Insider Stories) - Finance Minister Chatib Basri said that Indonesia's government is preparing several short- and long-term mitigation policies to overcome the country’s slowing economic growth caused by uncertainties in the global economy.

In the short term, government is ready to activate ‘bond stabilization framework’ by among other things, increasing coordination with the State-Owned Enterprise Ministry and related state-owned companies through the issuance of government bonds and increasing the participation of state-owned banks in maintaining liquidity.

He said the government had also increased the fiscal space in the 2014 state budget for public transportation, infrastructure, and social security and strengthening coordination measures to maintain the stability of financial system.

As a long term policy, the government is trying to improve the current account deficit by pushing increases in exports, managing imports, and improving investment climates by providing fiscal instruments include a ‘tax allowance’ revision by simplifying procedures and a ‘tax holiday’ revision by adding more sectors and relaxing requirements on the investment period and minimum amount.

Chatib said that other mid-longer term policies included the implementation of macro-prudential policies to reduce the volatility and susceptibility of the national economy from external fluctuations.

Meanwhile on Tuesday, Bank Indonesia Governor Agus Martowardojo said annual inflation hit 8.18 percent in July, the fastest pace since February 2009. But he was confident that by next year it would fall back to a 3.5-5.5 percent range. Prices have been pushed up by June’s average 33 percent jump in fuel prices.

Worries about inflation, and tightening by the US Federal Reserve, prompted the central bank to surprise markets twice recently. In June, BI hiked the benchmark interest rate and in July it raised the rate twice as much as expected. The next rate meeting is on Aug. 15.

Eric Sugandi, economist at Standard Chartered said, high inflation will be painful, but it will also be temporary and cutting spending on fuel subsidies “will be good in the long run"