UI Economist Calls The Indonesian Economic Conditions Solid Enough To Face The Impact Of Rising Fuel Prices

Photo: Doc. Pertamina

JAKARTA - University of Indonesia economist Fithra Faisal said the national economic condition was solid enough to face the impact of the increase in Pertamina's fuel selling price due to national deflation announced by BPS minus 0.21 percent in the second quarter of 2022. "This is the largest deflation after 2019. This means that inflationary pressures have started to subside. On an annual basis, last August inflation was 4.69 percent, (compared to) July which was only 4.9 percent, it was also deflation," he said in a statement in Jakarta, quoted from Antara, Saturday, September 3. Fithra suggested that the government should take advantage of the momentum to reduce the burden of fuel oil subsidies that have disrupted the fiscal stability of the state budget. In August 2022, Indonesia's manufacturing Purchasing managers index (PMI) was recorded at 51.7, an increase of 0.4 compared to the previous month of 51.3. "This means that our economy is now solid, inflationary pressures are not too big, tend to fall, so now the momentum is for price increases," said Fithra. The community of public policy experts who are members of the Indonesian Policy Analyst Association (AAKI) proposes three steps that the government can take to take to take advantage of this momentum. The three steps are the adjustment of subsidized fuel prices, the provision of social security cushions for the community, and energy reform. The formulation is the result of AKAKI's rapid study to study the urgency and impact of the fuel subsidy adjustment policy on various aspects. AKI assesses that reducing the amount of subsidies in fuel, especially pertalite, Pertamax, and diesel can meet the principles of justice, equality of opportunity, and innovation. The principle of justice referred to in this regard is the transfer of subsidies and compensation for fuel to other sectors that are more productive and in favor of the people who need it most, especially the health and education sectors. The subsidy adjustment step is very appropriate as a correction in the distribution of subsidies through fuel prices which have been less targeted so far. AKI General Chair Totok Hari Wibowo explained that the conversion of subsidies to increase public services, social pads, health facilities, education funds, and so on was considered important and urged to stop the swelling of fuel subsidies, most of which were burned on the streets by groups that were not eligible. The Indonesian government has announced an additional social cushion budget of Rp. 24.17 trillion. One of these assistances is direct cash assistance (BLT). On August 31, 2022, President Jokowi started the symbolic distribution of BBM BLT through the Jayapura Post Office in Papua. Jokowi said the BLT would be received 20.6 million beneficiaries. In addition, Jokowi also said that there would be BLT for 16 million workers. With this assistance, the president hopes that people's ability to face the increase in basic needs prices will be better. In addition to BLT BBM, there is also wage subsidy assistance or BSU of Rp600 thousand for 16 million workers with a maximum salary of Rp3.5 million per month. The budget that will be disbursed for the salary subsidy is Rp9.6 trillion. Then there is also social assistance provided in the form of regional transportation subsidies. The budget is taken from the transfer of 2 percent of the general allocation fund (DAU) and the profit-sharing fund (DBH) and intended for motorcycle taxi drivers and fishermen to other additional social protections. The total value of the prepared budget is IDR 2.17 trillion. Islamic Cendikiawan UIN Syarif Hidayatullah Azyumardi Azra views that 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 bankruptcy of the state budget, as in the case of the United States government which has repeatedly locked down due to disrupted financial liquidity. Azyumardi said the government's desire to adjust fuel prices could be done in stages so that people would not be surprised and panic. Then, this policy should involve many parties.