Learning From Experience, Economists Give Governments Don't Give Subsidies To Goods

Illustration (Photo: Doc. Antara)

JAKARTA - Institute for Development of Economics and Finance (Indef) senior economist Aviliani revealed that the policy of providing subsidies to goods should no longer be carried out in the future.

According to him, the policy of providing subsidies to people who need it more must be carried out in order to prevent moral hazards.

"This is an experience that I think from several Presidents, the same experience was carried out. Now this should not be done again, it should be done only to people," he said in an online way in Jakarta, quoted Monday, September 5.

Aviliani continued, Pertamina was also considered unable to supervise subsidized fuel consumption so that the previously 23 million kiloliters of pertalite quota swelled to 29 million kiloliters and burdened the state budget.

"That's why it's better to subsidy to people, because it means that the market is much more at the same price. As now, since the increase on September 3, 2022, the price at gas stations has made no difference so that people don't stand in line at only one of the gas stations with subsidies because the disparity is getting smaller," he said.

Aviliani also appreciated the government's steps that had provided direct cash assistance (BLT) for the transfer of fuel subsidies before announcing the increase in fuel prices.

"The government was right yesterday, give BLT first, then price goes up. Therefore, speed is needed in distributing BLT so that people have not experienced price increases (due to fuel increases)," he said.

He understands the government's election to increase subsidized fuel prices to be able to suppress the swelling of the state budget. He said the swelling of the state budget would be very dangerous if allowed because the government would later have to increase the budget deficit.

Just so you know, the government has prepared BBM Direct Cash Assistance (BLT) of IDR 12.7 trillion which will be given to 20.65 million underprivileged families of IDR 150,000 per month and will be given in September for 4 months.

In addition, the government has also prepared a budget of Rp9.6 trillion for 16 million workers with a maximum salary of Rp3.5 million per month in the form of wage subsidy assistance given at Rp600,000.

"I have also ordered local governments to use two percent of public transfer funds of IDR 2.17 trillion for public transportation assistance, online motorcycle taxi assistance and for fishermen," said President Joko Widodo at a press conference in Jakarta, Saturday, September 3.