Fuel Price Hike to Push Inflation Rate to Over Six Percent: Indonesia

JAKARTA, KOMPAS.com - Head of the Fiscal Policy Agency (BKF) of Indonesia’s Finance Ministry Febrio Kacaribu projects that the increase in fuel price will push Indonesia’s inflation this year from 6.6 percent to 6.8 percent.

“We have calculated an increase of 1.9 percent in inflation from the impact of the fuel price adjustment. The 2022 inflation will reach from 6.6 percent to 6.8 percent,” State News Antara quoted Febrio in Jakarta, Monday, Sept. 5.

He said that this year’s inflation projection could reach from 6.6 percent to 6.8 percent, exceeding the government’s target of four percent to 4.8 percent.

Meanwhile, the country’s central statistics agency (BPS) recorded inflation as of Aug. 2022 at 4.69 percent (YoY), which was down from 4.94 percent (YoY) in the previous month.

Also read: Indonesia Records Inflation at 1.68 Percent in 2020

He added that the government will continue to maintain Indonesia’s inflation rate until the end of the year to remain below seven percent through controlled distribution and food prices.

“Until the end of 2022, we will strive to maintain the inflation rate with all efforts, specifically maintaining food prices and the distribution. We hope the inflation to be below seven percent by the end of the year,” he added.

Earlier, the government on Saturday, Sept. 3, raised the price of Pertalite fuel to 10,000 rupiahs ($0.67) per liter from 7,650 rupiahs ($0.51) per liter; the price of diesel fuel from 5,150 rupiahs ($0.35) per liter to 6,800 rupiahs ($0.46) per liter; and the price of Pertamax, from 12,500 rupiahs ($0.84) per liter to 14,500 rupiahs ($0.97) per liter.

This increase was applied since the government shifted the fuel subsidies to social assistance as the number of energy subsidies and compensation taken from the state budget had reached 502.4 trillion rupiahs ($33.7 billion), including energy subsidies of 208.9 trillion rupiahs ($14.03 billion) and energy compensation of 293.5 trillion rupiahs (19.7 billion).

Indonesia’s President Joko Widodo said that increasing fuel prices was the government’s last option. He said that the state budget should be prioritized to provide subsidies to the underprivileged, and at this time, the government must make decisions in difficult situations.

Source: State News Antara