Indonesia plans fuel-hike social programmes
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Indonesia's new finance minister on Wednesday reiterated the government's commitment to hiking fuel prices, at the same time revealing a plan to overhaul the country's social-compensation system to make its cash-transfers programme better targeted to the
A hike in the price of subsidised fuel is set to come into effect this year, but the policy details - such as when and by how much fuel prices will be increased - would not be announced too soon to prevent excessive buildup of inflation expectations, Finance Minister Bambang Brodjonegoro said.
“We may have a voucher system where we won’t hand out cash,” the finance minister told The Jakarta Post. There could be a social-assistance scheme designed for fishermen and farmers, among other people, in which they would buy fertilisers or subsidised fuel for their businesses using the vouchers.
Telecommunications companies would be involved as well, as the government would design a system which disadvantaged people in some areas could access the social-compensation funds through a mobile-money mechanism considering Indonesians’ cell phones usage has exceeded 100 per cent.
The new social-assistance programme would not be a one-off that is distributed to the poor after fuel prices are raised, according to Bambang.
Instead, it could be held recurrently under the Social Affairs Ministry to promote economic inequality and tackle poverty levels.
If Jokowi proceeds with hiking fuel prices, the government currently has 10 trillion rupiah of funds earmarked for social assistance funds: 5 trillion rupiah from the revised 2014 State Budget and another 5 trillion rupiah from the 2015 State Budget.
“The new voucher-based compensation system, if implemented, is a big step forward in attacking the structural poverty in the economy,” said Edimon Ginting, chief economist of the Asian Development Bank in Indonesia.
“It could make the government’s current subsidy scheme better targeted,” he went on. “It’s also good to see that the social assistance funds could be used by the poor not only for consumption, but also for productive activities.”
