President Joko “Jokowi” Widodo should act firmly and now to stop the hugely wasteful spending of taxpayers’ money and reallocate the estimated $30 billion in fuel subsidies that are burned annually on the streets to social welfare and other poverty-alleviation programs.
The situation now, though not yet critical, is already quite adverse, with the state budget and current-account balance being threatened with burgeoning deficits due to rising oil imports and weak commodity exports.
Further delays in raising the subsidized-fuel price would not only worsen the uncertainty but also make investors jittery and set off tremendous downward pressures on the rupiah with all its negative repercussions on macroeconomic stability.
After all, the government should not have to start from zero in the way of social protection programs to cushion the impact of the sudden general price increase on the country’s most vulnerable people. Data on low-income people based on poverty mapping done for the fuel-price increase in June last year is still adequate, and the previous government has set aside 5 trillion rupiah ($420 million) from the current 2014 budget in contingency funds for social-assistance programs.
The Jokowi government should be commended for designing a new, more comprehensive social-assistance program, which is also linked to the campaign to enhance financial inclusion through a mobile-banking mechanism and the realignment of social protection with health care and education programs for poor families.
But the fuel-price increase should not wait much longer, while the fine-tuning of the social-protection programs is still going on.
The Finance Ministry itself has estimated that every 1,000 rupiah increase in the price of subsidized fuel would save about $34 million a month. And if the government goes ahead with its plan to raise fuel prices by 3,000 rupiah per liter, the savings could reach more than $100 million a month or $1.2 billion a year, which is quite a sum for poverty alleviation programs and infrastructure development.
Certainly there will be start-up problems within the implementation of the new social-assistance program. Inflationary pressures will increase within the next two to three months as producers of goods and services adjust to the new fuel prices. But it is economically unwise and even morally irresponsible for the government to continue the wasteful spending of almost $30 billion a year that benefits mostly the middle- and high-income people.
We should brace for a new wave of street protest demonstrations and possibly labor strikes, as workers will demand a hefty increase in the new minimum wages. But we should undergo these short-term pains for the long-term good of our economy.
We are confident the social turbulence that could occur after the fuel-price increase would not be so massive as to damage overall political stability, unless the coalition of opposition parties, notorious for their evil intent, exploited the vulnerable situation to harass the new government.
(Editorial, The Jakarta Post)
(Asia News Network)
