Solid Economy, Fuel Price Adjustment Gain Momentum – Various indicators show that Indonesia’s economy is solid enough to deal with the impact of the subsidized fuel price adjustment. The government should take advantage of this momentum to reduce the burden of fuel subsidies which have disrupted the fiscal stability of the state budget.

This was stated by University of Indonesia economist Fithra Faisal Hastiadi in a discussion held by HMI Badko Jabodetabek & Banten in Jakarta.

According to Fitra, the good condition of the Indonesian economy is indicated by the national deflation announced by BPS recently, which was minus 0.21 percent in the second quarter of 2022.

“This is the largest deflation after 2019. It means that inflationary pressure has started to subside. On an annual basis, inflation in August was 4.69 percent, (compared to) July which was 4.9 percent, that’s deflation too,” said Fithra Faisal who also Executive Director of this Next Policy.

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In addition, Indonesia’s manufacturing purchasing managers index (PMI) also rose in August to 51.7 from 51.3 previously.

“This means that our economy is now solid, inflationary pressure is not too big, tends to fall, so now is the momentum for price increases,” said Fitra.

The community of public policy experts who are members of the Association of Indonesian Policy Analysts (AAKI) proposes three steps the Government can take to take advantage of this momentum.

Named the 3W Scenario, the three steps are mandatory to adjust subsidized fuel prices, to provide social safety cushions for the community, and to carry out energy reforms.

“This is the result of a quick study by AAKI to study the urgency and impact of the fuel subsidy adjustment policy on various aspects,” said the General Chair of AAKI, Dr-Ing Totok Hari Wibowo.

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AAKI considers that reducing the amount of subsidies on fuel, especially Pertalite, Pertamax and diesel, must be done in order to fulfill the principles of justice, equality of opportunity, and innovation. The principle of justice referred to in this case is the transfer of fuel subsidies and compensation to other sectors that are more productive and side with the people most in need, especially in the health and education sectors.

This subsidy adjustment step is very appropriate as a correction to the distribution of subsidies through fuel prices, which so far have not been well targeted.

“Conversion of subsidies to improving public services, social support, health facilities, education funds, and so on is considered important and urgent to stop the swelling of fuel subsidies, most of which are burned on the streets by non-eligible groups,” continued Totok Hari Wibowo.

Reorientation of Subsidies in APBN

The government itself has announced an additional social support budget of Rp. 24.17 trillion. One of these social assistances is in the form of direct cash assistance (BLT). President Jokowi has started the distribution of BLT BBM symbolically through the Jayapura Post Office, Papua.

Jokowi said that 20.6 million beneficiaries would receive the BLT. In addition, Jokowi said there would be BLT for 16 million workers. With this assistance, Jokowi hopes that the people’s ability to deal with rising prices for basic needs will be better.

“Today we have started the distribution of BLT BBM which is given to the public for four months, Rp. 150,000 per month, so the total is Rp. 600,000,” said Jokowi.

In addition to BLT BBM, there is also wage subsidy or BSU assistance of Rp. 600 thousand for 16 million workers with a maximum salary of Rp. 3.5 million per month. The budget that will be disbursed for this salary subsidy is Rp 9.6 trillion.

Then there is also social assistance provided in the form of regional transportation subsidies. The budget for this is taken from the diversion of 2 percent of the General Allocation Fund (DAU) and the Revenue Sharing Fund (DBH) and is intended for motorcycle taxi drivers and fishermen, as well as other additional social protection. The total value of the prepared budget is Rp. 2.17 trillion.

According to the Head of the State Intelligence Agency (KABIN) Gen. Pol (Ret.) Budi Gunawan, the scheme for providing social support to the poor will still develop.

“The government understands that poor people must be the focus of social protection efforts in the midst of economic pressure due to the current global situation,” said Budi Gunawan.

The government, continued KABIN, is reallocating subsidies in the APBN, among others by evaluating the amount of energy subsidies that are found to be mistargeted, as shown by BPS data. This step is to provide more effective social protection to the most vulnerable groups.

ā€œEconomic intelligence analysis data shows that the global situation will put economic pressure on all countries. The government will anticipate this through the design of the state budget that protects vulnerable groups more effectively,ā€ said KABIN.

According to an Islamic scholar from UIN Syarif Hidayatullah Prof. Azyumardi Azra, the adjustment of fuel prices to reduce the burden of energy subsidies in the state budget is unavoidable. This is to avoid a bigger negative impact, namely the crisis and the bankruptcy of the state budget, as in the case of the US government, which was repeatedly “locked down” due to disrupted financial liquidity.

Azyumardi said the government’s desire to adjust fuel prices could be done gradually so that people would not be surprised and panicked. Then, this policy should involve many parties.

“Of course this policy must invite the involvement of other parties, including civil society, because this is a shared business,” said Azyumardi Azra in a webinar in Jakarta.

Source: – Berita Terbaru Bisnis, Ekonomi, Investasi Indonesia by

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