Fuel price hike impact 'greater than expected'<\/p>\n
JAKARTA (JP): The weekend fuel price increase could have a
\ngreater impact on the economy and the public than the government
\nhas anticipated, particularly amid the current social and
\npolitical uncertainty, experts warned.<\/p>\n
Economist Umar Juoro said that the fuel price increase would
\nsend inflation higher than projected which would in turn further
\nerode consumer purchasing power.<\/p>\n
\"It (the fuel price increase) will create a greater burden on
\nthe people and will also cause a slowdown in economic activity,\"
\nUmar said on Sunday.<\/p>\n
The government raised fuel prices by an average of 30 percent
\non Saturday as part of measures to help limit the widening 2001
\nstate budget deficit to a safer level. The government will also
\nraise electricity rates by more than 17 percent early next month.<\/p>\n
Srijanto Tjokro Sudarmo, an executive at the Indonesian
\nindigenous businessmen association (HIPPI), also expressed
\nconcern about the impact of the fuel price increase on the public
\nand the business sector.<\/p>\n
\"It is regrettable. Despite the already weak purchasing power
\nof the people, they're still burdened with financing the (state
\nbudget) deficit,\" he said.<\/p>\n
\"The fuel price increase will create an intense negative
\nimpact on the development of a people's economy,\" he added.<\/p>\n
The government, however, is confident that the public can cope
\nwith increase.<\/p>\n
\"The President expects that the people can cope with this. It
\n(the impact) has been thoroughly studied by a (government) team,\"
\nAdhie Massardi, spokesman of President Abdurrahman Wahid, told
\nreporters on Saturday.<\/p>\n
The government initially planned to raise the fuel price on
\nFriday, however the move was delayed pending a final social and
\npolitical assessment, particularly amid massive labor protests in
\nmajor cities across the country.<\/p>\n
Several economists warned the government to delay the fuel
\nprice increase, saying time was needed to publicize the new
\npolicy to avoid unrest.<\/p>\n
Raising fuel prices has always been a politically sensitive
\nissue in Indonesia. The downfall of former president Soeharto in
\n1998 was partly attributed to the fuel price increase in April
\nthat year.<\/p>\n
Umar said that the fuel price increase would raise the
\ninflation rate this year by 1.5 to 2 percentage points higher
\nthan the government's original projection of 9.3 percent.<\/p>\n
He added that economic activity would also slow down due to
\nthe multiplier effect of the fuel price increase.<\/p>\n
Umar said that the fuel price increase could trigger social
\nunrest if the government failed to provide sufficient
\ncompensation to the people, particularly the poor.<\/p>\n
The government has allocated around Rp 2.2 trillion in
\ncompensation for poor people badly affected by the fuel price
\nincrease.<\/p>\n
The government will also provide compensation to operators of
\npublic transportation such as city buses so that the cost of
\nfares does not increase.<\/p>\n
Umar also said that the government must cooperate with the
\nHouse of Representatives to deal with grievances from the public.<\/p>\n
\"The government can't face the protest alone,\" he said.<\/p>\n
The House has given its approval to the government fuel price
\nincrease policy. Considering the current tension between
\nPresident Abdurrahman Wahid and the House, however, it is
\ndifficult to imagine legislators defending the government against
\nprotesters of the fuel price increase policy.<\/p>\n
The legislators had earlier asked the People's Consultative
\nAssembly (MPR), the country's supreme legislature, to hold a
\nspecial session to call for the President's accountability.<\/p>\n
IMF<\/p>\n
Meanwhile, the International Monetary Fund (IMF), which is
\nproviding a multibillion dollar bailout program to the country,
\ncautiously praised the decision.<\/p>\n
\"We support the government's move on fuel prices but the
\ncompensation package for the poor is a very important element of
\nit and we still have to study that,\" IMF senior representative in
\nJakarta John Dodsworth told Reuters.<\/p>\n
\"For long term sustainability, the issue of fuel prices has to
\nbe dealt with, but the timing is very delicate. Only the
\ngovernment can make that decision. We cannot make that decision,\"
\nDodsworth added. (rei)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/fuel-price-hike-impact-greater-than-expected-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}