Analyst says fuel price hike aims to defend rupiah exchange rate
Public Policy Analyst from Padjadjaran University (Unpad), Bonti Wiradinata, assessed that the increase in non-subsidised fuel prices (BBM) aims to maintain the rupiah’s exchange rate against the US dollar and alleviate pressure on the state budget (APBN).
“The urgency of raising fuel prices, I estimate, is related to the government’s strategy in defending the rupiah exchange rate against the US dollar and addressing the APBN pressure occurring as a result of the rupiah’s weakening,” Bonti said in a statement received in Jakarta on Thursday.
He explained that the price of Pertamax, as a non-subsidised fuel, fundamentally follows global oil price movements and the rupiah exchange rate. When these two factors experience prolonged pressure, the government ultimately has to make adjustments to avoid creating a larger fiscal burden.
Bonti considered the government’s move to hold prices over the past few months commendable, as it provided an economic and psychological cushion for the public. However, he noted that the longer the price adjustment is postponed, the greater the pressure borne by the state and energy business entities.
He added that maintaining non-subsidised fuel prices below the economic price in the long term could potentially strain cash flows and increase the need for energy compensation. Therefore, the price adjustment is seen as a realistic step to maintain the state’s fiscal health.
“By adjusting prices, the government minimises the potential for ballooning energy compensation costs. This is an effort to ensure the APBN remains focused on financing other priorities,” Bonti said.
He added that the risk of social unrest due to the Pertamax increase is relatively more manageable compared to raising subsidised fuel prices. This is because Pertamax users generally come from groups with more options in managing their energy consumption patterns.
A similar view was expressed by the Executive Secretary of the Indonesian Consumers Foundation (YLKI), Rio Priambodo. He said his organisation understands that non-subsidised fuel prices are influenced by global oil price dynamics and the rupiah’s exchange rate against the US dollar.
Rio also urged that the Pertamax price increase be accompanied by improvements in service quality that consumers can directly feel. According to him, the public has the right to receive product quality and service commensurate with the price they pay.
He stressed that consumers are entitled to guaranteed fuel quality, ease of access, distribution reliability, measurement accuracy, and better service at all petrol stations.
“Consumers should not merely be asked to accept a price increase without receiving a commensurate improvement in benefits and service quality,” Rio said.