Even Though Fuel Prices Increase, Inflation Tends To Be Controlled If Food Stocks Are Safe

JAKARTA - Bank Mandiri economist Faisal Rachman revealed that the energy and food sectors are the biggest contributors to rising inflation. In accordance with the policy of increasing subsidized fuel oil (BBM), a policy is indeed needed to minimize the impact of the increase.

One of them is maintaining the availability of food stocks in the community. "So, the source of inflation until August 2022 is in energy and food. In September 2022, energy will increase in line with the fuel tariff adjustment. So to minimize this impact, food inflation must come down," said Faisal, in Jakarta, Monday, September 5.

Thus, said Faisal, the government's steps to strengthen food stocks after the increase in subsidized fuel could help reduce inflation. Faisal explained that when food inflation can be controlled, it will have an effect on rising inflation in general.

"So if it is successful, the general inflation will tend to be under control," he said.

Furthermore, Faisal explained that controlling food inflation is not only important for efforts to suppress inflation in general, but also to maintain people's purchasing power.

"In addition, it is also important to control food inflation because food is a basic need, so it will be closely related to purchasing power," he said.

On the other hand, Faisal estimates that the increase in the price of the three types of fuel is at risk of cutting economic growth. Until the first semester of 2022, the Indonesian economy was able to grow by 5.23 percent supported by increased mobility after the relaxation of the PPKM, social assistance from the Government, and high export performance amid rising commodity prices.

"Thus, we still see that the Indonesian economy can still grow in the range of 5 percent on a full-year basis in 2022," he said.

The increase in fuel prices will also trigger an increase in inflation due to the direct impact and subsequent impact on inflation such as rising prices for transportation and services, distribution, to the increase in the prices of some other goods and services as well. Inflation at the end of 2022 is predicted to be in the range of 6.27 percent.

"The 6.27 percent figure has taken into account food inflation, which tends to be controlled, even though it has included the impact of fuel inflation on food because it is related to distribution," he concluded.

Keep Food Availability

INDEF researcher, Rusli Abdullah said that the price increase due to the impact of the increase in fuel prices would not be far away because actually, the prices of foodstuffs such as eggs and wheat had gone up before.

"Actually, there has been an increase in processed ingredients, wheat, eggs, plus components in transportation. How much is the increase? It's not as bad as if the feed price increases by a percentage," said Rusli.

According to Rusli, the government needs to play a role in maintaining the availability of food, especially rice. "There are two parties, farmers want high prices, producers want affordable prices," he said.

Even so, said Rusli, the government must provide a decent price for farmers' grain. According to him, the government must lower the price so that Bulog's purchase price is in line with the Cost of Goods Sold (HPP).

"If farmers want to sell to other buyers above the HPP, that's the farmer's right," said Rusli.

Rusli said that although there is now criticism of the government for raising fuel prices, this will not last long. "In one or two months there will be adjustments, there will be a new balance point. I think in order to achieve a new balance, of course, there will be those who are affected, meaning the lower classes of society," he said.

Moreover, continued Rusli, before raising fuel prices, President Jokowi had already distributed BLT. More or less the existence of BLT is to help vulnerable people face rising prices due to fuel.

"The government has prepared BLT, as a bumper. But how to implement it in the field, BLT must be right on target," concluded Rusli.

As is known, the government intensely monitors and evaluates the implementation of national food policies to suit the current conditions. One of them is to strengthen rice stocks.

Coordinating Minister for Economic Affairs Airlangga Hartarto held a Limited Coordination Meeting (Rakortas) on Food Policy, it was decided on a policy to purchase farmers' grain/rice with price flexibility.

"And the second is that the National Food Agency has assigned Perum Bulog to strengthen CBP stocks to purchase grain/rice using price flexibility," said Airlangga.